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Ulisse Zanelli

Netscape
1994 1995 1996E 1997E 1998E 1999E 2000E 2001E 2002E 2003E 2004E 2005E
revenues 33251 41,564 51,954 64,943 81,179 101,473 126,842 158,552 198,190 247,738 309,672
costs 42600 4,323 5,403 6,754 8,443 10,553 13,192 16,489 20,612 25,765 32,206
R&D 12236 15,295 19,119 23,899 29,874 37,342 46,678 58,347 72,934 91,167 113,959
other operating expenses 26933 29,510 31,692 33,121 33,283 31,457 26,637 33,296 41,620 52,025 65,031
capex 15229 16,625 17,716 18,379 18,265 16,845 13,699 17,124 21,405 26,756 33,445
operating income -63748 -24,190 -21,977 -17,210 -8,686 5,277 26,637 33,296 41,620 52,025 65,031
net interest income 734
net income -63014
PPE 4283
capital expenditures 15236
depreciation 1836
current asset 768.93 25650
current liabilities 5350.09 23820
NWC -4581.15 1829 1829 1829 1829 1829 1829 1829 1829 1829 1829 1829
Change in NWC 6410 0 0 0 0 0 0 0 0 0 0
FCF

growth (1995-2005) 1.25


growth (2005-20xx) 1.04
risk-free 0.07
risk premium 0.06
tax rate 0.34

NPV
Terminal value
Ulisse Zanelli
Review session 6 - Netscape's valuation
1994 1995 1996E 1997E 1998E 1999E 2000E 2001E 2002E 2003E 2004E 2005E
revenues 33,251 46,551 65,172 91,240 127,736 178,831 250,363 350,508 490,712 686,996 961,795
costs 3,472 4,841 6,778 9,489 13,285 18,598 26,038 36,453 51,034 71,448 100,027
R&D 12,236 17,131 23,983 33,576 47,007 65,810 92,134 128,987 180,582 252,815 353,941
other operating expenses 26,933 33,051 39,755 46,532 52,372 55,438 52,576 73,607 103,049 144,269 201,977
operating income -9,390 -8,472 -5,344 1,642 15,073 38,985 79,615 111,462 156,046 218,465 305,851
net interest income 734 0 0 0 0 0 0 0 0 0 0
Earnings before tax -8,656 -8,472 -5,344 1,642 15,073 38,985 79,615 111,462 156,046 218,465 305,851
tax 0 0 0 558 5,125 13,255 27,069 37,897 53,056 74,278 103,989
tax loss carry forward -9,390 -17,863 -23,207 -22,648 -17,523 -4,269 0 0 0 0 0
total tax paid 0 0 0 0 0 0 22,801 37,897 53,056 74,278 103,989
net income after tax -8,656 -8,472 -5,344 1,084 9,948 25,730 52,546 73,565 102,991 144,187 201,862
PPE 4,283 19,512 38,132 60,356 86,177 114,917 144,603 171,643 209,497 262,494 336,690 440,564
capex 15,229 18,620 22,224 25,821 28,741 29,686 27,039 37,855 52,997 74,196 103,874
depreciation 1,951 3,813 6,036 8,618 11,492 14,460 17,164 20,950 26,249 33,669 44,056
Change in NWC 6,410 0 0 0 0 0 0 0 0 0 0
net interest income 734 0 0 0 0 0 0 0 0 0 0
FCF -29,078 -23,279 -21,532 -16,119 -7,301 10,505 42,671 56,660 76,243 103,660 142,044
discount rate 1.1109 1.2341 1.3710 1.5230 1.6919 1.8795 2.0880 2.3195 2.5768 2.8625 3.1800
PV(FCF) -26,175 -18,863 -15,706 -10,584 -4,315 5,589 20,437 24,427 29,589 36,213 44,668

growth assumption (1995-2005) 1.4


growth after 2005 1.04
risk-free 0.07
risk premium 0.06
tax rate 0.34
cost of equity 0.11 Terminal value 2,083,580

PV(terminal value) 655,217


NPV 740,496
Ulisse Zanelli
5)
total sales commission 9,800,000
sales commission per share 7.00%
share price 28
total new shares 5,000,000
old shares 33,001,000
total shares outstanding 38,001,000

IPO Proceeds 140,000,000


gross spread (7%) 9,800,000
net proceeds 130,200,000

cash 30.06.1995 25,435,736


cash burning=1/2*CF(1995) -14,539,144
cash amount end 1995 10,896,592

Long Term Obligation (LTD) 2,236,331

equity value of the firm 879,356,569

value per share 23 shares are overvalued with growth assumption of 40%

implied equity value for S=28 1,064,028,000

Netscape's growth that justify $28 per share 0.43376