Tottenham Football Club Plc Case SolutionÂ
The value is calculated using the few assumptions relating to the working capital requirement which is assumed to be 20%, which would decrease over the years as we move forward, whereas the terminal growth in the year 2020 is assumed to be 4%. By adding the value of the available cash and cash equivalents, the companyâ€™s value is calculated which is190.49 and from that the value of the debt is subtracted to come up with the equity value which is calculated to be 147.41. The current alternative will provide the per share value to be 15.87.
|Per Share Value||$15.87|
- Sign a new strikerÂ
It is the people in any organization who can create the difference or can be able to give the advantage of competitive edge in the market. Mr. Daniel Levy in order to generate more revenues in current business was confronted with the alternatives of signing a new skilled striker, which could significantly help the club in training the existing players and prove to be a successful alternative. In order to estimate the value of the enterprise using the DCF method for choosing the given alternatives, some assumptions were taken with respect to the working capital requirement and the growth prospect in the terminal value for the company.
This alternative will add the revenues in the form of broadcasting a new player along with theincrease in the revenue from attendance and broadcasting a new player. Moreover,transfer fee would be required to be paid in the year 2008, which is tax deductible and the addition in the payroll for the player.
The enterprise value in choosing this alternative is 249.31. On the other hand, the equity value as calculated by adding the cash and cash equivalents and subtracting the value of debt is 232.52. The value per share in this alternative is calculated to be 25.03.
The pairing of Pavlyuchenko with a new striker has the potential to impact Tottenhamâ€™s bottom line significantly. If the season is healthy throughout, then the goals would increase by 12. As a result, this would improve the teamâ€™s rank and improve the total number of points which wouldlead to greater revenues.
|Per Share Value||$25.03|
- Build the new stadium and sign a new strikerÂ
The last among the three alternatives with Mr. Daniel Levy is to add both the above alternatives of adding a new stadium and signing a new striker. In order to do the DCF valuation in this case, the addition of the two calculations is required in order to come up with the value of the enterprise which would be 239.56 and the per share value in this alternative is 23.98.
|Per Share Value||$23.98|
- Based on the results from 2, select a best choice and provide a logical argument to support it.Â
In order to select the best alternative among the three, it is recommended that the last option of adding the new stadium as well as signing a new striker should be chosen because if the company only opts to sign a new striker which is also giving the highest per share value, then there are numerous risks attached with respect to the health of the new striker and his future concern. As the club is successful in developing its brand among the competitors, which is evident from the number of fans worldwide, the significant issue which it was facing was the shortage of capacity therefore,the addition is highly required by signing a new striker which is proved quantitatively as well to be successful…………….
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