KEY INPUTS, other than Sales

One time cash payment to W's eqty-hldrs 1,000 Rs lakhs

Sign on bonus to W's founders 50 per year, 3 years, Rs lakhs
License fee, for prints from catalogue
Royalty on catalogue sales 10%
One time payment for catalogue rights 400 Rs lakhs
End of 5 years, book value = salvage value
Fixed Assets and Intangibles 0
Salvage Values of other, as % on ending book value
Inventories 50%
Receivables 75%
Net Wkng Cap
Inventory(t) / Sales(t+1) 15%
Receivables(t): days of Sales(t) to be collected 6
No of days assumed in a year 360
Costs
COGS / Sales 40%
Sales and Distribution Costs / Sales 10%
Additional Variable Cost of IT / Sales 5%
Taxes
Marginal tax rate 40%
Depreciation (no mention in case) 0
All acqstn pymnts written off at end of year
Losses on Receivables & Invent disposal: deductible
Opportunity Cost of Capital 30%
Legal issue
Probability of losing case 30%
Legal damages paid to P2W 200 Rs lakhs
Fraction of sales from painting (lost if lose case) 20%
Variable cost of paintings / lost sales of paintings 20%
Other - Legal issue
Expected value of legal damages 60
= 200 payment to P2W times 0.3 probability of losing case
Lost sales (of paintings) = 0.2*All Sales 180 400 800 1,000 1,200
Variable cost of paintings (@ 20% lost sales of paintings) 36 80 160 200 240
Contribution lost on paintings, pre-tax 144 320 640 800 960
Contribution lost on paintings, after-tax 86.40 192.00 384.00 480.00 576.00
ExpctVal, after-tax contribution lost 25.92 57.60 115.20 144.00 172.80
= Contrib lost, after-tax * 0.3 probability of losing case
4. Expected Incremental outflow from Legal Issue 60.00 25.92 57.60 115.20 144.00 172.80

Net Cash Flows

Net Cash flow for discounting = 1+2+3-4 (1,195) 353.08 14.07 511.47 739.33 1,785.53
PV Cashflows at Opp CoC = 30% (1,195.00) 271.60 8.32 232.80 258.86 480.90
NPV 57.48