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Tottenham Case Questions

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102 views2 pages

Tottenham Case Questions

Uploaded by

Jeff Cheung
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Tottenham Hotspur plc Case Questions

Corporate Finance (45-822)


Prof. Glover

Read the “Tottenham Hotspur plc” case. In constructing your analysis of the case,
you should address the questions posed below.

ˆ You should explain your reasoning and calculations where appropriate. Show and
explain your work.

ˆ Number the responses in your report to correspond to the question numbers below.

ˆ Be sure to include your group number and the full names and emails of all group
members.

Assumptions for your analysis:

ˆ Assume that the appropriate discount rate for the DCF valuations is 9.6%. You can
take this as given.

ˆ Using the past 10 years of data for Premiership revenue and point totals, a regression
estimate implies that for every 1% increase in a team’s point total, a team can expect
a 1.52% increase in revenues.

Questions:

1. Use the data in Exhibit 2 of the case to compute the enterprise value of Tottenham
implied by the current share price.

2. Assume Tottenham continues with their current stadium and current player strategy
(i.e., assume they don’t build a new stadium or sign a new striker):

a. Perform a DCF valuation analysis using the cash flow projections given in the
case. Based on your DCF analysis, what is the enterprise value of Tottenham
Hotspur? What is the share price implied by your DCF valuation?
b. Using the data in Exhibit 1, perform a multiples analysis to determine an en-
terprise value for Tottenham. Explain your approach (which ratios you used,
which clubs you included, etc.). What is the share price for Tottenham implied
by your multiples-based valuation?
c. Compare the share prices you computed using DCF and multiples to Totten-
ham’s current share price of £13.78. Do you think the club is fairly valued?

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3. Use a DCF approach to compute the NPV of each of the following investment
decisions1 :

a. Build the new stadium


b. Sign a new striker
c. Build the new stadium and sign a new striker

4. Given your calculations in (3), what would be the stock price reaction to a surprise
announcement for each of the three scenarios considered?

5. Exhibit 4 provides data on Tottenham’s stock price reaction to outcomes of their


matches. How do these data inform your assessment of how a the stock market
might value the addition of a new striker?

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Hint: The case gives information on how a new striker is expected to affect net goals. The assumption
above in this assignment document gives a relation between club points and revenues. We need to know
how net goals would translate into points to determine the expected incremental revenues. One approach
is to run a regression using the data on average points and average net goals across clubs in Exhibit 1.

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