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Valuation of GoPro;This exam requires you, among other things, to estimate the stock price for GoPro, and provide the analysis as requested. You will need to use ?Sources of Financial Data? listed in Course Content to obtain the necessary financial info/statements for GoPro, to identify its peer companies and to obtain pricing and financial information for them. For some parts of the exam you might already have numbers from the Midterm. Don't forget to make adjustments in response to my feedback comments, if necessary.;A. Choose several peer companies for GoPro and justify your choice. Choose several valuation multiples and using comparable ratios of peer companies (as we did in Project 2 and discussed in Conferences) and GoPro financial information from prospectus, estimate the company?s hypothetical stock price on June 25, 2014. It is required for this question to list your major assumptions and properly reference sources of information that you used in your calculations.;B. Using the same peers and industry data, please estimate GoPro?s WACC Show all your data used for calculations. Again, please state all your assumptions and sources of information.;C. GoPro went public on June 26, 2014. How do your valuations compare to the company?s IPO price? How do they compare to its first trading day opening and closing prices? If your valuations differ from observed prices, can you briefly forward any possible explanations?;D. In February 2011 Sageview Capital Master, L.P., acquired 7,894,635 shares of Series A preferred stock for aggregate consideration of $20.0 million. The stock paid $1.05 dividend in February 2012, and at IPO was converted to common shares. If Sageview sold shares at IPO, what its annualized return would be? Did Sageview actually sell at IPO? Why/why not?;E. The following information is for pedagogical purposes only and unlike earlier questions does not deal with real situation. There are rumors that GoPro is negotiating a three year agreement with photo equipment manufacturer NiCa, according to which GoPro will have a right to sell its HERO manufacturing license to NiCa at the beginning of any year in this three-year period. Once GoPro sells the license, it receives a one-time license fee of $ 50 M, but it cannot manufacture and sell HERO itself anymore. The current value of HERO line to GoPro is $60 M. Each year this value can go up 5% or down 20% in comparison with the previous year. If the risk-free rate is 4%, how much this agreement is worth to GoPro? What should the company do over three years? Please provide as many details as possible in your explanations and support them by numbers. (Hint: think about this as an American put option);Make sure to justify your responses by using the available data/info and carrying out any needed and relevant calculations.;Attachments Preview;Fin630 Final Fall 2014 Optional template.xlsx Download Attachment;This exam is open book and is to be your individual work ONLY. You are not allowed to consult with anyone in answering the questions. Let me remind you that you signed an;Academic Integrity Pledge at the beginning of semester. If you have questions about the exam, please post them in Your Questions about Final Exam topic in Discussion Forum;About Final Exam. That way, I can deal with all students as fairly as possible, especially with those who might have the same question. You may post your questions anonymously.;Posts are moderated and I also reserve the right to delete posts or comments that are too explicit in providing solutions or answers.;To receive full credit, please show all your work, showing your work will also ease getting a partial credit.;Unlike midterm exam and homework, this time I am not providing official Excel templates. This template is for your convenience only. You are free to use it or other templates from;homework and group projects or your own file(s) created from scratch. You can submit your solution in one Excel file with multiple tabs or in several Word and Excel files. Please;remember, that all your numbers need to be verifiable either you should reference the source of your initial data or provide the calculations for further steps. Also, please state all the;assumptions you are making.;The exam is due by 11:59 pm, November 25, Eastern Time. Late Policy specified in the Syllabus will be followed for any exam submitted after the due date.;Problem;Part A;Part B;Part C;Part D;Part E;Total;Percentage;Grading Sheet;Your;Maximum;Points;0;25;0;20;0;15;0;15;0;25;0;100;0.00%;0.0%;0.0%;0.0%;0.0%;0.0%;0.0%;= Value given in problem;= Formula/Calculation/Analysis required;= Qualitative analysis or Short answer required;= Goal Seek or Solver cell;= Score (filled by professor);Choose several peer companies for GoPro and justify your choice. Choose several valuation multiples and using;comparable ratios of peer companies (as we did in Project 2 and discussed in Conferences) and GoPro financial;information from the prospectus, estimate the companys hypothetical stock price on June 25, 2014. It is required;for this question to list your major assumptions and properly reference sources of information that you used in your;calculations.;Peer Companies;Ticker;PERIOD ENDING;GoPro;GPRO;Relevant Items from Income Statement and Balance Sheet;Shares Outstanding;Jun 25, 2014 Closing Price;Market Capitalization;Calculated Multiples;GoPro;Your assumptions and Sources;Solution Legend;= Value given in problem;= Formula/Calculation/Analysis required;= Qualitative analysis or Short answer required;Using the same peers and industry data, please estimate GoPro's WACC. Show all your data;used for calculations. Again, please state all your assumptions and sources of information.;Value given in problem;Formula/Calculation/Analysis required;Qualitative analysis or Short answer required;Your assumptions;Author;Pleasereplacestabsbelowby;realpeersnames.Thenumberof;peersdoesnothavetobefive;Company;Comparable Companies Unlevered Beta;Levered Beta;Market Value Market Value;Debt/ Equity;of Debt;of Equity;Peer Company A;Peer Company B;Peer Company C;Peer Company D;Peer Company E;Median;Mean;Relevered Beta;GoPro;Mean;Unlevered;Beta;WACC Calculation;Company's Capital Structure;Debt to Total Capitalization;Equity to Total Capitalization;Debt to Equity Ratio;Cost of Equity;Risk-free rate;Market risk Premium;Levered Beta;Cost of Equity;Cost of Debt;Cost of Debt;Taxes;After Tax Cost of Debt;WACC;Target;Target Debt/;Marginal Tax Relevered Beta;Equity;Rate;Equity/;Marginal;Total;Tax Rate;Assets;Unlevered Beta;GoPro went public on June 26, 2014. How do your valuations compare to the;companys IPO price? How do they compare to its first trading day opening and;closing prices? If your valuations differ from observed prices, can you briefly forward;any possible explanations?;Your Estimated Price Range;Min;Max;Expected;IPO Price;Opening Price;Closing Price;Your explanation;In February 2011 Sageview Capital Master, L.P., acquired 7,894,635 shares of Series A;preferred stock for aggregate consideration of $20.0 million. The stock paid $1.05;dividend in February 2012, and at IPO was converted to common shares. If Sageview;sold shares at IPO, what its annualized return would be? Did Sageview actually sell at;IPO? Why/why not?;Investment date;Investment;Shares invested;Share Price at investment;Dividend Date;Dividend;IPO Date;Number of common shares;IPO Price;2/1/2011;$20,000,000;7,894,635;2/1/2012;$1.05;Solution;Did Sageview actually sell at IPO? Why/why not?;Value given in problem;Formula/Calculation/Analysis required;Qualitative analysis or Short answer;Part E;Solution Legend;= Value given in problem;= Formula/Calculation/Analysis required;= Qualitative analysis or Short answer required;The following information is for pedagogical purposes only and unlike earlier;questions does not deal with real situation. There are rumors that GoPro is negotiating;a three year agreement with photo equipment manufacturer NiCa, according to which;GoPro will have a right to sell its HERO manufacturing license to NiCa at the beginning;of any year in this three-year period. Once GoPro sells the license, it receives a one-time;license fee of $ 50 M, but it cannot manufacture and sell HERO itself anymore. The;current value of HERO line to GoPro is $60 M. Each year this value can go up 5% or;down 20% in comparison with the previous year. If the risk-free rate is 4%, how much;this agreement is worth to GoPro? What should the company do over three years? Please;provide as many details as possible in your explanations and support them by numbers.;(Hint: think about this as an American put option);Part E;Risk-neutral probability formula;Given;Value Now;Value increase (%), u;Value decrease (%), d;Risk free Interest rate, r;License Fee (in $ millions);$60.00;5%;-20%;4%;$50.00;p;exp(rt) S d;exp rt (1 d);Su S d;u d;Risk-neutral probability;Discount factor (exp(-risk free rate));Solution;Today;Year One;Year Two;Year Three;$69.4575;$66.1500;$63.0000;HERO value to GoPro;Value of waiting (NPV-Waiting);Value of Exercising Option (NPV-Exercise);Value;$60.000;$52.9200;$50.4000;$48.0000;$40.3200;$38.4000;$30.7200;Your recommendation;The terminal period growth rates were estimated such that the intrinsic valuation of the firm's equity would;equal the current market capitalization of the firm using the "Goal Seek" function.;Page 6;View Full Attachment;Fin630 Final Fall 2014.docx Download Attachment;FIN 630: Final Exam;Dima Leshchinskii;This exam is open book and is to be your individual work ONLY. You are not allowed to consult;with anyone in answering the questions. Let me remind you that you signed an Academic;Integrity Pledge at the beginning of semester. If you have questions about the exam, please post;them in Your Questions about Final Exam topic in Discussion Forum About Final Exam. That;way, I can deal with all students as fairly as possible, especially with those who might have the;same question. You may post your questions anonymously. Posts are moderated and I also reserve;the right to delete posts or comments that are too explicit in providing solutions or answers.;To receive full credit, please show all your work, showing your work will also ease getting a;partial credit.;Unlike midterm exam and homework, this time I am not providing official Excel templates. I;attach a template that is for your convenience only. You are free to use this template or other;templates from homework and group projects or your own file(s) created from scratch. You can;submit your solution in one Excel file with multiple tabs or in several Word and Excel files. Please;remember, that all your numbers need to be verifiable either you should reference the source of;your initial data or provide the calculations for further steps. Also, please state all the assumptions;you are making.;The exam is due by 11:59 pm, November 24, Eastern Time. Late Policy specified in the;Syllabus will be followed for any exam submitted after the due date.;Page 1 of 3;FIN 630: Final Exam;Dima Leshchinskii;ValuationofGoPro;This exam requires you, among other things, to estimate the stock price for GoPro, and provide;the analysis as requested. You will need to use Sources of Financial Data listed in Course;Content1 to obtain the necessary financial info/statements for GoPro, to identify its peer;companies and to obtain pricing and financial information for them. For some parts of the exam;you might already have numbers from the Midterm. Don't forget to make adjustments in response;to my feedback comments, if necessary.;A. Choose several peer companies for GoPro and justify your choice. Choose several;valuation multiples and using comparable ratios of peer companies (as we did in Project 2;and discussed in Conferences) and GoPro financial information from prospectus, estimate;the companys hypothetical stock price on June 25, 2014. It is required for this question to;list your major assumptions and properly reference sources of information that you used;in your calculations.;B. Using the same peers and industry data, please estimate GoPros WACC Show all your;data used for calculations. Again, please state all your assumptions and sources of;information.;C. GoPro went public on June 26, 2014. How do your valuations compare to the companys;IPO price? How do they compare to its first trading day opening and closing prices? If;your valuations differ from observed prices, can you briefly forward any possible;explanations?;D. In February 2011 Sageview Capital Master, L.P., acquired 7,894,635 shares of Series A;preferred stock for aggregate consideration of $20.0 million. The stock paid $1.05 dividend;in February 2012, and at IPO was converted to common shares. If Sageview sold shares at;IPO, what its annualized return would be? Did Sageview actually sell at IPO? Why/why;not?;E. The following information is for pedagogical purposes only and unlike earlier;questions does not deal with real situation. There are rumors that GoPro is negotiating a;three year agreement with photo equipment manufacturer NiCa, according to which GoPro;will have a right to sell its HERO manufacturing license to NiCa at the beginning of any;year in this three-year period. Once GoPro sells the license, it receives a one-time license;fee of $ 50 M, but it cannot manufacture and sell HERO itself anymore. The current value;1 Here is the part of this list;Yahoo Finance;Google Finance;Reuters;Edgar (SEC source of 10-K, S-1 form, Prospectus and other required financial reports);Hoovers (general company information);Bloomberg (a good source of interest rate data);NYSE Euronext (New York Stock Exchange website);Page 2 of 3;FIN 630: Final Exam;Dima Leshchinskii;of HERO line to GoPro is $60 M. Each year this value can go up 5% or down 20% in;comparison with the previous year. If the risk-free rate is 4%, how much this agreement is;worth to GoPro? What should the company do over three years? Please provide as many;details as possible in your explanations and support them by numbers. (Hint: think about;this as an American put option);Make sure to justify your responses by using the available data/info and carrying out any needed;and relevant calculations.;QuestionWeights;A;B;C;D;E;25;20;15;15;25;Page 3 of 3

Paper#18273 | Written in 18-Jul-2015

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