Prepare a three year financial model

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We are assembling a top team across the company to look at the feasibility of adding a daily section of the newspaper and website devoted to national sports coverage. This would entail a significant expansion upon our current coverage with highlights of key games, sports scores, standings, etc. We have been asked to build a basic financial analysis to demonstrate what level of incremental revenue we have to assume to target acceptable levels of return.

Key assumptions for the business case:

- Assume the incremental revenue is all advertising related
- This initiative should improve circulation retention and drive new subscriptions, but for the purpose of this analysis, assume no incremental impact here
- Capital Investment of $2m for enhancements to existing website (assume 3 year useful life for book and tax basis accounting)
- Incremental staffing costs of 12 heads at $100k per year
- Incremental production costs of $0.02 per copy (assume 1.4 million daily copies and 304 annual pub days)
- Assume advertising commissions expense at 5% of incremental revenue
- Assume a corporate tax rate of 30%
- Assume a discount rate of 10%

Please prepare a 3 year financial model that you will present to the management team. The analysis needs to demonstrate what level of incremental revenue is needed over a 3 year time horizon to meet our 10% hurdle rate. In addition, the analysis should touch on other key metrics such as NPV, IRR, and annual EBITDA impact.

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The task is related to the capital budgeting problem of finance. The incremental revenue has to be computed in this case with the given fields like the capital investment, operating costs and hurdle rate. After computing the revenue, the amount of EBITDA has to be calculated. NPV and IRR metrics have to be assessed as well.

Reference no: EM131373467

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inf1373467

3/21/2017 6:19:05 AM

Need a 35 hour turn around. Must be done on excel Must be done via Excel can you please clarify the administration costs. 12 heads at 100k. Does this mean staffing costs 100K/ year or (100K*12 heads) 1.2M / Year. Please clarify this... thank you Also please quickly explain where depreciation fits on this sheet. The depreciation says 66,666.67/year. However the the capital investment is 2,000,000 depreciated over 3 years. So 666,666.67 a year. Can you please fix this. Also can you explain how you got 6008400 (Discounted cash flow).. 1.65372x-106079= 200000 x = 99705 (Required Incremental Revenue) is it correct, x= 10,921,272.7 Thanks for clearing my all of the doubts, this is really amazing place where i could be able to resolve all of my queries. Thanks a lot.

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