CASE Sampa Video

Those who have not gone through the case may read it online it's available here . I am also
providing some brief details.
About Sampa Video Inc

Second largest in Boston area with 30 stores

Direct competitor Blockbuster

No intention to expand outside Boston

Customer satisfaction - key differentiator

New Business

Home deliery of DVDs like netflix, kramer.com and cityretrive.com

Will open a web site for same

Could lead to cannibalization

In long run company expect annual revenue growth rate from 5% to10% a year
over the following five years

As home delivery business mature , Free Cash Flow will again grow at 5%

Problem

Huge Investment required

Company estimated up front investment of 1.5 million

Two available options

1. Fund a fix amount of debt, which could either be kept in perpetuity or
paid down gradually.

2. Adjust the amount of debt so as to maintain a constant ratio of debt to

firm value.

Exibit 1. Summary of
financial information
FY 2000
Sales
22500
EBITDA
2500
Depreciation
1100
Operating profit
1400
Net Income
660

Exhibit 2. Projections of Incremental expected sales and cash

flows for home
delivery project
Sales
EBITD
Depriciation
EBIT
Tax Expanse
EBIAT
CAPX*
Inv. in working capital

2002
1200
180
-200
-20
8
-12
300
0

2003
2400
360
-225

2004
3900
585
-250

2005
5600
840
-275

2006
7500
1125
-300

135
-54

335
-134

565
-226

825
-330

81
300
0

201
300
0

339
300
0

495
300
0

* Annual capital expenditure of $300000 were in addition to the initial $1.5

million layout and are assumed to remain constant in perpetuity

Exhibit 3. Additional
assumptions
Risk free rate
Project cost of debt
Market risk premium
Corporate tax
Project debt beta
Asset beta for karmer.com
and cityretrive.com

5%
6.80%
7.20%
40%
0.25
1.5

Solucin:
Costo inicial $ 1.5 Millones de diciembre de 2001

Pronstico Flujo de caja libre

2002

2003

2004

2005

2006

1200000

2400000

3900000

5600000

7500000

EBITD (Rev. less exp.)

180000

360000

585000

840000

1125000

(-) Depreciacion

200000

225000

250000

275000

300000

EBIT

-20000

135000

335000

565000

825000

8000

-54000

-134000

-226000

-330000

Ventas

(-) Impuesto 40%

EBIAT

-12000

81000

201000

339000

495000

(+) Depreciacion

200000

225000

250000

275000

300000

Flujo de caja operativo

188000

306000

451000

614000

795000

-300000

-300000

-300000

-300000

-300000

Menos CAPEX
Menos inversin en (los cambios en)
NWC
Flujo de Caja Libre

-112,000.00

6,000.00

151,000.00

314,000.00

495,000.00

Valor Terminal

5,691,823.49

Planificacin de Deuda de valor de la relacin B / (S + B) = 0,32

Esta es la variable de eleccin. Cuando se elige una parte de la deuda de la WACC es el
mtodo ms fcil de aplicar.
Deuda implcita de cuota de capital
propio de B / S
Tasa de impuesto

0.47058824
0.33

2007

519,750.00

Beta de Activos
Beta deuda
Equidad Beta
WACC

1.5
0.25
1.89
0.1413152

Valor Presente de FCF proyectados WACC

Valor Presente del Valor Terminal
Valor total
Valor presente neto
Implcita cantidad inicial de Deuda
Nota: los dos mtodos de valoracin no son
FCF no son una perpetuidad nivel

448,709.88
2,939,161.28
3,387,871.16
1,887,871.16
1,084,118.77

exactamente equivalentes ya que la

Costo no apalancado del capital = 0.158

Costo de capital de la deuda = 0.068
Costo de (apalancada) Equity Capital = 0,186
Costo inicial $ 1.5
Millones de diciembre 2001
Pronstico Flujo de Caja Libre

Ventas
EBITD (Rev. menos exp.)
Menos Depreciacin
EBIT
Impuestos 40%

2002

2003

2004

2005

2006

1200000

2400000

3900000

5600000

7500000

180000

360000

585000

840000

1125000

200000

225000

250000

275000

300000

-20000

135000

335000

565000

825000

8000

-54000

-134000

-226000

-330000

EBIAT

-12000

81000

201000

339000

495000

Depreciacin (volver a agregar)

200000

225000

250000

275000

300000

Flujo de caja operativo

188000

306000

451000

614000

795000

-300000

-300000

-300000

-300000

-300000

-112,000.00

6,000.00

151,000.00

314,000.00

495,000.00

Menos PAC EX
Menos inversin en (los cambios en) NWC
Flujo de caja libre
No apalancado Valor Terminal en 2006
Costo no apalancado del Capital
PV de Previsin del perodo FCF - rA

4,812,500.00
0.158
417,336.08

PV del Valor Terminal

2,311,149.00

No apalancado valor presente de todos FCF

2,728,485.09

VAN no apalancado

1,228,485.09

2007

519,750.00

Planeado nivel de financiacin de la

deuda
Impuestos Escudos

1,000,000.00

1,000,000.00

1,000,000.00

1,000,000.00

1,000,000.00

27,200.00

27,200.00

27,200.00

27,200.00

27,200.00

Valor Terminal del ahorro de impuestos

El costo de la deuda de capital
PV del Impuesto Escudos - rB
PV de la Terminal Valor de los escudos
fiscales
Total de Valor Presente de los escudos
fiscales

400,000.00
0.068
112,125.15
287,874.85
400,000.00

Total de Valor Actual Neto del Proyecto

1,628,485.09

Valor total del proyecto

3,128,485.09

implcita inicial
Ratio de deuda Valor

Pagos de inters

0.319643525

68,000.00

68,000.00

68,000.00

68,000.00

68,000.00