Radio One Inc Case SolutionPosted by John Smith on April 26th, 2018 Radio One Inc Case SolutionCalculation of After-tax Cash Flow (amounts in thousands of dollars) Free Cash Flow (after-tax), Net Working Capital Discount Rate Calculation Cost of Debt. Cost of Equity, WACC Discounted Cash Flow Valuation (amounts in thousands of dollars) Terminal Value Calculation, Terminal Value (in 2004), Total Value of the New Stations, Present Value of Cash Flows Value Based on Trading Multiples BCF, EBITDA, After-tax Cash Flow, Average Value (trading multiples) Questions CoveredWhy does Radio One want to acquire 12 urban stations from ClearChannel Communications in the top 50 markets along with the nine stations in Charlotte, NC, Augusta, GA, and Indianapolis, ID? What are the benefits and risks? Are the cash flow projections for the potential new markets reasonable? What are the incremental after-tax cash flows for 2001 through 2004 for the potential new markets? Use the information in Exhibit 9 along with your estimate of capital expenditures, working capital, and taxes to estimate the after-tax cash flows. What discount rate is appropriate for valuing the after-tax cash flows? What terminal value should be used to estimate the value of cash flows beyond 2004? What price should Radio One offer based on the discounted cash flow analysis? What price should Radio One offer based on a transaction and trading multiples analysis? Assuming that Radio One’s stock price is 30X BCF, can it offer as much as 30X BCF for the new stations? What should Radio One offer for the new stations? Like it? Share it!More by this author |