Paramount valuation -1993
Cash flow forecast
year 0 1 2 3 4 5
year 1993 1994 1995 1996 1997 1998
Sales $ 4,905.00 $ 5,264.30 $ 5,648.60 $ 6,060.00 $ 6,500.70
EBITD $ 660.60 $ 737.00 $ 790.80 $ 848.40 $ 910.10
Depreciation $ (162.00) $ (172.00) $ (184.00) $ (196.00) $ (209.00)
EBIT $ 498.60 $ 565.00 $ 606.80 $ 652.40 $ 701.10
Tax 34% $ (169.52) $ (192.10) $ (206.31) $ (221.82) $ (238.37)
EBIT(1-t) $ 329.08 $ 372.90 $ 400.49 $ 430.58 $ 462.73
Operating Cash Flow (EBITD-Tax) $ 491.08 $ 544.90 $ 584.49 $ 626.58 $ 671.73
Capital expenditures $ (160.10) $ (177.30) $ (176.70) $ (202.90) $ (216.60)
Change WC $ (45.60) $ (62.10) $ (66.50) $ (71.20) $ (76.20)
Asset sale $ 900.00
Net Cash Flow $ 285.38 $ 1,205.50 $ 341.29 $ 352.48 $ 378.93
Discount rate (1+WACC)^t $ 258.70 $ 990.66 $ 254.25 $ 238.04 $ 231.98
PV (1-5) $ 1,973.63
Terminal value
g2 5%
CF6 $ 397.87
TV year5 $ 7,490.76
TV 0 $ 4,585.87
Enterprise Value $ 1,973.63 $ 4,585.87 $ 1,007.10 $ 7,566.61
Equity $ 6,553.61
P0 $ 54.61
WACC Calculation
S 120 55 $ 6,600.00
B $ 1,013.00
S/B+S 0.867
Rf Beta Rm-Rf
5.68% 1 5.50%
Rs 11.18%
Rb 7.05%
t 34.00%
Rb*(1-t) 4.65%
WACC 10.31%
1990 1991 1992 1993 Average
Historical tax rate 32% 37% 31% 34% 34%
Hard synergy calculation 1 2 3 4 5
1994 1995 1996 1997 1998
Estimated synergies: Paramount -Viacom merger 134 150 171 216 223
Discount rate (1+WACC)^t $ 121.47 $ 123.27 $ 127.39 $ 145.87 $ 136.52
PV (1-5) $ 654.52
Terminal value of synergies
g2 5%
Synergies year 6 $ 234.15
TV of synergies year5 $ 4,408.35
PV of TV of synergies $ 2,698.81
PV of all synergies $ 654.52 $ 2,698.81 $ - $ 3,353.34
Synergies per share $ 27.94
Current share price $ 54.61
Total value of paramount shares to Viacom $ 82.56
Paramount valuation -1993
EBITD multiple
EBITD Multiple 1993 Est 1994
Wald Disney 13.3 12.2
Time Warner 11.2 10.4
Turner Broadcasting 14.8 11.9
Median 13.3 11.9
Average 13.1 11.5
Time Warner 11.2 10.4
Parmount EBITD $ 560.50 $ 660.60
Estimated capital (medians) $ 7,454.65 $ 7,861.14
Estimated capital (Average) $ 7,342.55 $ 7,596.90
Time Warner multiple $ 6,277.60 $ 6,870.24
Estimated equity (medians) $ 7,448.75 $ 7,855.24
Estimated equity (Average) $ 7,336.65 $ 7,591.00
Estimated equity (TW) $ 6,271.70 $ 6,864.34
Estimated stock price (medians) $ 62.07 $ 65.46
Estimated stock price (averages) $ 61.14 $ 63.26
Estimated stock price (TW) $ 52.26 $ 57.20
Paramount 1993
Income statement 1993
Revenues 4,641.60
Cost of Goods Sold -3,047.60
SG & A -1,254.60
Operating Income 339.4
Other Income (expense) (6.6)
Interest Expense (94.0)
Interest Income 78.5
Earnings before Taxes 317.3
Provision for Taxes (109.2)
Extraordinary Items (9.1)
Net Earnings 199.0
Depreciation and Amortization 221.1
Working Capital 802.7
Capital Expenditures 111.8
Balance sheet 1993
1993
ASSETS LIABILITIES
Cash 380.6 Current Maturities of LT debt
Short-term investments 626.50 Trade Accounts Payable
Trade receivables 1,062.20 Income taxes Payable
Inventories 633.7 Accrued Expenses and other
Other current assets 538.3
Total Current Liabilities
Total Current Assets 3,241.30 Deferred Liabilities
Property, Plant, & Equipment 1,572.20 Long-Term debt
Accumulated Depreciation -382.4
Net PP&E 1,189.80 Total Liabilities
Intangibles 1,560.30
Other Assets 1,454.1 EQUITY
Common Stock
Total Assets 7,455.5 Paid-In Capital
Retained Earnings
Translation Adjustments
Total Net Worth
Total Liabilities and Equity
Price per share 54
Shares outstanding 120
Short term solvancy
Current ratio 2.248
Quick ratio 1.435
Finacial leverage
Debt/Assets 0.136
Debt/book equity 0.245
Debt/Market equity 0.156
Interest coverage (gross) 3.611
Interest coverage (net) 21.897
Profitability
Gross operating margins 0.073
Return on assets, ROA 0.046
Return on equity, ROE 0.048
Activity
Asset turnover 0.623
Receivables turnover 4.370 82 day credit
Inventory turnover 7.325 49 days
Market value
EPS 1.658
Price to earnings P/E 32.563
Market to book 1.569
Bankruptcy prediction
Ratio Coeficient product
X1 0.241 1.2 0.290
X2 0.437 1.4 0.612
X3 0.046 3.3 0.150
X4 6.397 0.6 3.838
X5 0.623 1 0.623
Z score 5.512
1993
10.1
196.5
64.5
1,170.50
1,441.60
871.2
1,002.9
3,315.7
119.6
778.1
3,252.2
(20.1)
4,129.8
7,445.5