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FIN 630 Final Exam (UMUC)

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FIN 630 Final Exam (UMUC) 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)

FIN 630 Final Exam (UMUC)

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