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Mod VI

Mod VI. Luke Friedman. Industry Definition. Comprised of companies that sell products through “non-store” channels, including catalogs, online sales, television, and radio Products and services are delivered through the mail

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Mod VI

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  1. Mod VI Luke Friedman

  2. Industry Definition • Comprised of companies that sell products through “non-store” channels, including catalogs, online sales, television, and radio • Products and services are delivered through the mail • Companies in this industry typically have low amounts of inventory and commonly act as the “middle-man” in sales transactions

  3. Regression Beta

  4. Regression Analysis • Alpha • Not statistically significant • T-stat<+/-2 • Beta • Not statistically significant • T-stat<+/-2 • More risk in B&N than in general economy

  5. Regression Analysis Continued • Standard Error • .2296 • -.31<BETA<1.83 • Not a high degree of confidence • Data pulled manually not on Yahoo!

  6. Published Betas

  7. Chosen Beta 1.05

  8. Cost of equity

  9. After-Tax cost of debt • Method 1—RNFL • 3%-10% • Method 2—Bloomberg • 1.7%

  10. RNFL

  11. WACC • Computed WACC • 7.75% • Bloomberg • 5.5%

  12. WACC Computation

  13. OLD DCF

  14. NEW DCF

  15. Conclusion and Q&A • Why Adjusted • Sole Survivorwill not perpetually liquidate • Demand for hard-cover books • No sell recommendations • ???

  16. MOD VII Problem

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