appraisal of the intangible assets of the … arrive at an opinion as to the fair market valu e of...

PREPARED FOR STATE OF NEW JERSEY, DEPARTMENT OF THE TREASURY,

DIVISION OF ADMINSTRATION

Project No. 4050129

APPRAISAL OF THE

INTANGIBLE ASSETS OF THE RADIO STATIONS OWNED BY THE

NEW JERSEY PUBLIC BROADCAST AUTHORITY

AS OF OCTOBER 1, 2010

M e d i a I n t e l l i g e n c e a n d I n v e s t m e n t R e s o u r c e s

January 24, 2011 Mr. Michael Jonas Department of the Treasury Division of Administration State of New Jersey 50 West State Street, 8th Floor PO Box 211 Trenton, New Jersey 08625-0211 Phone: 609-984-4847 Re: Estimate of the Fair Market Value of the Intangible Assets of the radio stations owned by the

New Jersey Public Broadcast Authority (NJPBA), as of October 1, 2010 Dear Mr. Jonas: Pursuant to your request, BIA Advisory Services, LLC (d/b/a “BIA/Kelsey”) has prepared appraisals to arrive at an opinion as to the Fair Market Value of the tangible and intangible assets of the radio stations owned by the New Jersey Public Broadcast Authority (NJPBA), as of October 1, 2010. Fair Market Value is defined later in this report. The valuation of the tangible assets is contained in another report, however, the total value of the tangible assets is used in this report.

15120 Enterprise Court, Suite 100 Chantilly, Virginia 20151

Phone: 703.818.2425 Fax: 703.803.3299 www.bia.com

M e d i a I n t e l l i g e n c e a n d I n v e s t m e n t R e s o u r c e s

Based on the data, analyses, and conclusions set forth in the report that follows, it is our opinion that the fair market values of these tangible and intangible assets, as of October 1, 2010, are as stated in the following value summary. Respectfully Submitted, BIA ADVISORY SERVICES, LLC (d/b/a BIA/Kelsey) William Redpath, ASA, CFA, CPA, ABV, CIPM

Vice President

AssetValue

Tangible Assets $692,921

FCC Licenses 2,658,000

Contributors Base Asset 51,587

Underwriters Base Asset 46,893

Goodwill 842,599

Total $4,292,000

Value Summary

New Jersey NetworkRadio Stations

as of October 1, 2010

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TABLE OF CONTENTS

STATEMENT OF INTRODUCTION ........................................................................................ 3 STATEMENT OF INTRODUCTION ....................................................................................... 3 IDENTIFICATION OF THE PROPERTY ................................................................................ 3 PURPOSE, INTENDED USE AND METHODOLOGY........................................................... 4 RIGHTS AND LIMITING CONDITIONS ................................................................................ 5 STATEMENT OF APPRAISERS’ INDEPENDENCE ............................................................. 6

INTANGIBLE ASSETS VALUATION ...................................................................................... 9 INTANGIBLE ASSETS VALUATION .................................................................................... 9 FCC LICENSES ....................................................................................................................... 10 CONTRIBUTORS BASE ASSET ........................................................................................... 16 UNDERWRITERS BASE ASSET ........................................................................................... 20

EXHIBIT A .................................................................................................................................. 24 WEIGHTED AVERAGE RETURN ON ASSETS ANALYSIS ............................................. 25

EXHIBIT B .................................................................................................................................. 27 QUALIFICATIONS ................................................................................................................. 28

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STATEMENT OF INTRODUCTION


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STATEMENT OF INTRODUCTION STATEMENT OF INTRODUCTION

BIA/Kelsey has been retained by NJPBA to estimate the Fair Market Value of the intangible assets of the radio stations owned by NJPBA, as of October 1, 2010. In this document, we have appraised the intangible assets that are separable from goodwill. The methodology, life, and value of each of the intangible assets are stated in the text of that particular asset. The most appropriate methods available were used in valuing these intangible assets. In the course of the appraisal, BIA/Kelsey was provided with station-related data and other information. BIA/Kelsey also spoke with Mike Jonas, and Rick Williams, Operations Manager and Assistant Director of NJN Engineering, in connection with our analysis. BIA/Kelsey has made no investigation as to the accuracy of this data or to the title of the assets.

IDENTIFICATION OF THE PROPERTY

As of October 1, 2010, NJPBA was the licensee of WNJB-FM, WNJM-FM, WNJN-FM, WNJO(FM), WNJP(FM), WNJS-FM, WNJT-FM, WNJY(FM), WNJZ(FM). In a separate valuation report, BIA/Kelsey estimated the fair market value of those radio stations, in asset sales, as going concerns, at $4,292,000, as of October 1, 2010. The purpose of this report is to identify the intangible assets and estimate their fair market values for review by the Department of the Treasury of the State of New Jersey. BIA/Kelsey estimated the fair market value of the tangible assets, in place and in use, of the radio stations of NJPBA, as of October 1, 2010, in a separate report. The total value of the tangible assets from that report will be used in this report. BIA/Kelsey has been retained by NJPBA to estimate the fair market values of the intangible assets that could be separated from goodwill. Those assets are: (1) FCC licenses; (2) the Contributors Base Asset; and (3) a Underwriters Base Asset.


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All of these intangible assets meet the following tests1:

(1) those assets are capable of being separated or divided from the acquired entity and sold, transferred, licensed, rented, or exchanged; or

(2) those assets arise from contractual or other legal rights (regardless of whether those rights are transferable or separate from the acquired entity or from other rights and obligations).

Details pertaining to the assets valued are included in the report.

PURPOSE, INTENDED USE AND METHODOLOGY

The purpose of this appraisal is to estimate, as of October 1, 2010, the fair market value of these intangible assets. This report is intended to be used for internal review by the Department of the Treasury of the State of New Jersey. In valuing the intangible assets, I have considered three approaches to value. These are the cost approach, the market approach, and the income approach. The cost approach is that approach which measures value by determining the current cost of an asset and deducting depreciation, that is, physical deterioration and functional and economic obsolescence. In its simplest form, it is nothing more than current replacement cost less all depreciation. The market approach is that approach to value in which recent sales and offering prices of comparable properties are analyzed to arrive at an indication of the most probable selling price of the subject property. The income approach is that approach to value in which income generated by the subject property is analyzed and projected over a specified time period and capitalized at an appropriate market rate to arrive at the property’s value.

1 Source: Statement of Financial Accounting Standards No. 141; June 2001.


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I have chosen the market approach for the FCC licenses, and an income approach for the Contributors Base Asset and the Underwriters Base Asset, as explained in the individual asset valuations in this report. For the purposes of this report, the definition of fair value, according to the Glossary in the American Society of Appraisers’ Business Valuation Standards, is: • Fair Market Value - “The price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.”

RIGHTS AND LIMITING CONDITIONS

This appraisal of the intangible assets of NJPBA has been prepared for the internal review of the Department of the Treasury of the State of New Jersey, and any other use of this report is invalid. It should be noted that the appraisal of the intangible assets of NJPBA has been prepared exclusively for the Department of the Treasury of the State of New Jersey (DTNJ) and is not to be reproduced in whole or in part for any reason without the express written consent of DTNJ and BIA/Kelsey. It should be noted that these intangible assets are a part of the going concern enterprise value of the radio stations of NJPBA. The values of these assets are a part of, not in addition to, the fair market value, in an asset sale, as a going concern, of those radio stations. The appraiser assumes no responsibility for matters of a legal nature affecting the property appraised. The appraiser also assumes property free and clear of all liens and other encumbrances. The information provided by the client was assumed to be accurate and no steps were taken to independently verify the material. This appraisal is valid only for the appraisal date or dates specified herein and only for the appraisal purpose specified herein. The client warrants that any reports, analyses, or other documents


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prepared for it by the appraiser will be used only in compliance with all applicable laws and regulations. No site visit to the studio or offices of NJPBA was conducted in the completion of this report.

STATEMENT OF APPRAISERS’ INDEPENDENCE

We certify to the best of our knowledge and belief: The statements of fact contained in this report are true and correct. The reported analyses, opinions and conclusions are limited only by the reported assumptions and limiting conditions, and are my personal, unbiased professional analyses, opinions and conclusions. BIA/Kelsey and we have no present or prospective interest in the property that is the subject of this report, and we have no personal interest or bias with respect to the parties involved. BIA/Kelsey’s and our compensation are not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. I hereby certify that, to the best of our knowledge and belief, the statements of fact contained in the report are true and correct, and this report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation and the Principles and Code of Ethics of the American Society of Appraisers, and the Statement on Standards for Valuation Services #1 from the American Institute of Certified Public Accountants.


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No one provided significant professional assistance to the person signing this report. The American Society of Appraisers has a mandatory recertification program for all of its Senior members. Mr. Redpath is in compliance with that program. BIA ADVISORY SERVICES, LLC (d/b/a BIA/Kelsey) William Redpath, ASA, CFA, CPA, ABV, CIPM Geoffrey C. Price Vice President Vice President

15120 Enterprise Court Chantilly, VA 20151

703-818-2425 January 24, 2011

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INTANGIBLE ASSETS

VALUATION

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INTANGIBLE ASSETS VALUATION INTANGIBLE ASSETS VALUATION

There are three (3) categories of intangible assets: (1) FCC Licenses; (2) Contributors Base Asset; and (3) Underwriters Base Asset. The fair values of these assets, by category, are seen in the Value Summary. The values of these assets, and their remaining useful lives, are stated in the preceding value summary and the following text. In certain tables, numbers may not exactly sum due to internal rounding.

FCC Licenses of NJPBA Radio Stations

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FCC LICENSES BIA Advisory Services, LLC (“BIA/Kelsey”) has prepared a valuation analysis of the FCC licenses of Radio Stations WNJS-FM, WNJM(FM), WNJO(FM), WNJY(FM), WNJN-FM, WNJZ(FM), WNJT-FM, WNJB-FM and WNJP(FM), as of October 1, 2010. The FCC licenses held by WNJS-FM, WNJM, WNJO, WNJY, WNJN-FM, WNJZ, WNJT-FM, WNJB-FM, and WNJP dictate the stations’ operating guidelines as specified by the Federal Communications Commission (FCC). The FCC licenses specify the transmitting power, antenna height and location the stations must use while broadcasting. These parameters effectively define the area over which the stations may broadcast. FCC rules and regulations also affect program content, by proscribing certain types of programming and requiring the programming to be “in the public interest.” Additionally, the FCC must approve any transfer WNJS-FM, WNJM, WNJO, WNJY, WNJN-FM, WNJZ, WNJT-FM, WNJB-FM, and WNJP’s licenses and has the power to revoke the stations’ licenses or assign them to another party at the end of each eight-year license period. WNJS-FM is a Class A radio station allotted to Berlin, New Jersey. WNJS-FM operates with an effective radiated power (ERP) of 20 watts vertically-polarized, and one watt horizontally-polarized, at a height above average terrain (HAAT) of 781 feet, on an assigned frequency of 88.1 megahertz (MHz). WNJS-FM also holds a construction permit (CP) to increase the vertically-polarized ERP to 80 watts, and increase the HAAT to 942 feet. The station had begun implementing the CP as of the October 1, 2010 valuation date and expected to complete construction by the end of October. WNJM is a Class A FM radio station licensed to Manahawkin, New Jersey. WNJM operates with an ERP of 200 watts vertically-polarized, one watt horizontally-polarized, at a HAAT of 259 feet, on an assigned frequency of 89.9 MHz. WNJO is a Class A FM radio station licensed to Toms River, New Jersey. WNJO operates with an ERP of four kilowatts (kW) vertically-polarized, one watt horizontally-polarized, at a HAAT of 121 feet, on an assigned frequency of 90.3 MHz.


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WNJY is a Class A FM radio station licensed to Netcong, New Jersey. WNJY operates with an ERP of 520 watts vertically-polarized and one watt horizontally-polarized, at a HAAT of 430 feet, on an assigned frequency of 89.3 MHz. WNJN-FM is a Class A radio station licensed to Atlantic City, New Jersey. WNJN-FM operates with an ERP of 6.0 kW vertically-polarized, 25 watts horizontally-polarized, at a HAAT of 276 feet, on an assigned frequency of 89.7 MHz. WNJZ is a Class A FM radio station licensed to Cape May Court House, New Jersey. WNJZ operates with an ERP of 6.0 kW circularly-polarized, at a HAAT of 236 feet, on an assigned frequency of 90.3 MHz. WNJT-FM is a Class A radio station licensed to Trenton, New Jersey. WNJT-FM operates with an ERP of 110 watts vertically-polarized, at a HAAT of 689 feet, on an assigned frequency of 88.1 MHz. WNJT-FM hold a CP (BPED-19990716MB) for a new satellite station licensed to Bernardsville, New Jersey. The CP was granted in July 1999 and has been extended to 2012, according to Mr. Rick Williams of NJPBA. According to Mr. Williams, the satellite station has not been constructed. WNJP is a Class A FM radio station licensed to Sussex, New Jersey. WNJP operates with an ERP of 450 watts circularly-polarized, at a HAAT of 637 feet on an assigned frequency of 88.5 MHz. WNJB-FM is a Class A radio station licensed to Bridgeton, New Jersey. WNJB-FM operates with an ERP of 2.5 kW vertically-polarized and one watt horizontally-polarized, at a HAAT of 220 feet on an assigned frequency of 89.3 MHz. A basic assumption in our valuation of these FCC licenses was that these radio stations were new radio stations, signing on-the-air as of the date of this valuation, October 1, 2010. We assumed the competitive situation that existed in the market as of that date, except that these stations were just beginning operations. In doing so, we extract the value of going concern and any other assets acquired, and are strictly valuing the FCC licenses. We have estimated the combined fair market value of the FCC licenses of the radio stations to be $2,658,000. The values of the NJPBA’s FCC licenses have been estimated using the market approach with the exception of WNJM-FM, WNJS-FM, and WNJZ, which have been valued using the cost approach. Because these radio stations are operated as non-commercial FM radio stations, the appraiser


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believes that valuing the radio FCC licenses using a market approach is more appropriate than using the income approach. BIA/Kelsey analyzed merger and acquisition transactions of non-commercial radios stations to arrive at the fair market value of these radio stations. BIA/Kelsey was able to find 21 relevant transactions between January 2010 and September 2010. This information is shown in Table 1. For each of the non-commercial stations that were sold during that time BIA/Kelsey analyzed purchase price versus population coverage reachable by the stations’ 60 dBu signal contour. The sales price of each of the stations was divided by the number of pops reachable by a 60 dBu signal to calculate price per pop.


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Table 1 – Comparable Sales Information

CALLS Freq. City of License State Market Mkt Rank

60 dBu Cov. Pop

Sales Price ($)000s

Sales Date

Price Per Pop.

WBOJ 88.5 Lumpkin GA Unrated 60,348 160 01/10 $2.65

KOAC 89.7 Astoria OR Unrated 28,566 85 01/10 $2.98

KVNC 90.7 Minturn CO Unrated 12,383 60 01/10 $4.85

WCJL 90.9 Morgantown IN Indianapolis, IN 39 145,736 1,000 01/10 $6.86

KLWO 90.3 Longview WA Unrated 96,835 200 02/10 $2.07

WLFE 90.9 Cutler Bay FL Miami-Ft. Lauderdale-Hollywood, FL 12 425,817 2,500 02/10 $5.87

WLIU 88.3 Southampton NY Nassau-Suffolk, NY 18 131,782 850 03/10 $6.45

WCBW 89.7 East St. Louis IL St. Louis, MO 21 163,532 200 04/10 $1.22

KNCH 90.1 San Angelo TX San Angelo, TX 281 106,426 350 04/10 $3.29

WXEL 90.7 W. Palm Beach FL West Palm Beach-Boca Raton, FL 47 2,649,861 3,850 04/10 $1.45

KJCQ 88.5 Westwood CA Unrated 23,299 100 05/10 $4.29

KAJC 90.1 Salem OR Portland, OR 23 21,407 100 06/10 $4.67

WCIN 91.3 Tunkhannock PA Wilkes Barre-Scranton, PA 70 274,219 275 06/10 $1.00

WSMR 89.1 Sarasota FL Sarasota-Bradenton, FL 73 696,197 1,275 08/10 $1.83

WDYN 89.7 Chattanooga TN Chattanooga, TN 106 852,508 2,500 08/10 $2.93

KRLJ 89.9 Jackson MO Unrated 104,428 220 08/10 $2.11

KBCP 90.7 Sealy TX Unrated 21,194 65 08/10 $3.07

KTRU 91.7 Houston TX Houston-Galveston, TX 6 3,416,534 9,500 08/10 $2.78

WHSS 89.5 Hamilton OH Cincinnati, OH 28 98,701 156 09/10 $1.58

WSRX 89.5 Naples FL Ft. Myers-Naples-Marco Island, FL 62 342,935 2,000 09/10 $5.83

KXWA 89.7 Loveland CO Ft. Collins-Greeley, CO 120 953,785 3,050 09/10 $3.20

Average $3.38

Median $2.98


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The median price per pop of the 60 dBu signals computed to be $2.98. Below is a table showing the 60 dBu signal coverage and the radio stations’ population for the nine NJPBA stations and the estimated “stick” value of these radio stations when multiplied by the 60 dBu calculated median price per pop of $2.98.

Calls City of License Population Served under

60 dBu Contour “Stick” Value WNJB Bridgeton 157,668 $469,000WNJM Manahawkin 48,509 $144,000WNJN Atlantic City 189,140 $563,000WNJO Toms River 166,526 $496,000WNJP Sussex 135,585 $403,000WNJS Berlin 47,570 $142,000WNJT Trenton 428,571 $1,275,000WNJY Netcong 195,173 $581,000WNJZ Cape May 73,721 $219,000

We have estimated that the following construction costs would be incurred for sufficient technical equipment and for the structuring of operational facilities for the nine FM stations: WNJB-FM, $195,000; WNJM-FM, $195,000; WNJN-FM, $219,000; WNJO, $188,000; WNJP, $177,000; WNJS-FM, $272,000; WNJT-FM, $248,000; WNJY, $177,000; and WNJZ $217,000. The construction cost estimates assume the minimum necessary technical plant required in order for the stations to begin their broadcast operations. The estimate construction cost figures are exclusive of land, buildings, towers, and associated improvements as it is assumed that the new stations would lease both their transmitter sites and studio and office locations. Deducting the aforementioned construction costs from the estimated “stick” values results in the following FCC licenses for the radio stations: WNJB-FM, $274,000; WNJN-FM, $344,000; WNJO, $308,000; WNJP, $226,000; WNJT-FM, $1,027,000; and WNJY, $404,000.


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We attempted to value WNJM-FM, WNJS-FM, and WNJZ’s FCC licenses using the market approach, but were unable to return a positive number due to the construction costs being higher than the arrived at “stick” value figure for each of the stations. As a result, the values of WNJM, WNJS, and WNJZ’s FCC licenses are based on their replacement costs. The appraiser estimates this replacement value, based on estimated legal, consulting, engineering, and in-house charges to be $25,000 for each station.

WNJB-FM’s FCC License: $274,000 WNJM-FM’s FCC License: 25,000 WNJN-FM’s FCC License: 344,000 WNJO(FM)’s FCC License: 308,000 WNJP(FM)’s FCC License: 226,000 WNJS-FM’s FCC License: 25,000

WNJT-FM’s FCC License: 1,027,000 WNJY(FM)’s FCC License: 404,000 WNJZ(FM)’s FCC License: 25,000

Total FCC License Value: $2,658,000

Contributors Base Asset

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CONTRIBUTORS BASE ASSET The value of the Contributors Base Asset is equal to the present value of all the net cash flows that would be expected to be received from the contributors base in the future, given projected future revenues and its expected life. To estimate the survival rate for the radio division’s contributors base, I reviewed data from DonorCentrics Executive Program Overview report on NJN’s Annual TV Gifts for Fiscal Year 2010. This report had contributor attrition data for the NJN television stations. Because no such data was supplied to us for NJN’s radio stations, I used this attrition data for the radio stations. In this section of this report is the sheet the contributor attrition data. Fiscal years end on June 30 of each year. The data is by number of contributors, not contributor revenue. Such data was not available for an attrition analysis. I summed the “Renew” and “Additional” number for each year FY 2007 through FY 2010 and divided by the total number of contributors from the previous fiscal year. The survival rates calculated to 46.25% in FY 2007, 39.57% in FY 2008, 41.76% in FY 2009 and 48.35% in FY 2010. The average of the four survival rates is 43.98%, and I will use that as the projected annual survival rate going forward. As seen on Table 2, I projected revenues for this contributors base through FY 2024. This projection is my estimate of the revenues to be earned in the future from the contributors who were already contributing to NJN Radio, as of October 1, 2010. Based on our knowledge of the not-for-profit radio industry and discussions with Mike Jonas, it is our belief that non-for-profit radio stations would continue operating even if they did not receive these underwriters’ revenues. Therefore, I did not deduct operating expenses or deduct contributory asset charges for contributing assets, such as tangible assets, working capital and an assembled workforce asset. Also, because this is an asset for a non-for-profit entity, I did not deduct any tax payments.

Contributors Base Asset

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The annual net benefits, which equal each year’s projected revenues, are then discounted to present value using an after-tax discount rate of 10.00% (see Appendix B for an explanation). The present value of the discounted cash flows generated by the Contributors Base Asset, as of October 1, 2010, is $51,587, which is the value of this asset. The estimated remaining useful life of this asset is about 14 years.

Fair Market Value: $51,587

dono/CentricsrM Executive Program Overview

NJN Public TelevisionAnnual TV GiftsFiscal Year 2010

Gift Type Comparison: Section C

Regardless of station database coding, donorCentrics™ uses standardized gift-timing rules to determinewhether a donor is new, renewed, rejoined or gave additional gifts. Standardized business rules based on gifttiming make it possible to benchmark and compare performance across all stations or to allow a single station toanalyze performance when station rules change.

• New: the first gift on a donor's record.» Renewal: a gift within 9 to 17 months of the previous membership gift.• Rejoin: any gift made 17 or more months after the previous membership gift.• Additional: gifts made from 0 to 9 months after a membership gift.

Donor Counts by Gift Type

Renew

Rejoin

New

Additional

FY06

8,104

3,571

12,140

3,745

FY07

8,361

4,143

10,212

4,386

FY08

7,951

4,281

9,023

2,776

FY09

7,244

3,933

6,792

2,792

FY10

7,168

3,513

6,348

2,870

09-10 06-10%Chanae %Chanae

-1.0%

-10.7%

-6.5%

2.8%

-11.5%

-1.6%

-47.7%

-23.4%

Total 27,560 27,102 24,031 20,761 19,899 -4.2% -27.8%

30,000

25,000 I

1

20,000 1

I

15,000 ;

10,000

5,000 ' f

3,745

12,140

3,571

& tft^ t

4,386

10,212

4,143

2,77$

9,023

4,281

2,792

6,792

3,933

2,870

6,348

3,513

DAdd

a New

a Rejoin

m Renew

?,1S8

FY06 FY07 FY08 FY09 FY10

Consultant Cprnmentary

Copyright 2010 Target Analytics Confidential PageS

Fiscal Year1 Total Revenue

EBITDA Margin Tax

After Tax Cash Flow

Capital Charges Net Benefit

Present Value at 10.00%

2011 $24,468 $24,468 $0 $24,468 $0 $24,468 $23,6092012 18,917 18,917 - 18,917 - 18,917 16,792 2013 8,320 8,320 - 8,320 - 8,320 6,714 2014 3,659 3,659 - 3,659 - 3,659 2,684 2015 1,609 1,609 - 1,609 - 1,609 1,073 2016 708 708 - 708 - 708 429 2017 311 311 - 311 - 311 172 2018 137 137 - 137 - 137 69 2019 60 60 - 60 - 60 27 2020 26 26 - 26 - 26 11 2021 12 12 - 12 - 12 4 2022 5 5 - 5 - 5 2 2023 2 2 - 2 - 2 1 2024 1 1 - 1 - 1 0 2025 0 0 - 0 - 0 0

Total Present Value of Net Benefits: $51,587

Table 2

State of New Jersey Radio StationsValuation of Contributors Base Asset

Underwriters Base Asset

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UNDERWRITERS BASE ASSET The value of the Underwriters Base Asset is equal to the present value of all the net cash flows that would be expected to be received from the underwriters base in the future, given projected future revenues and its expected life. To estimate the survival rate for the radio division’s underwriters base, we reviewed historical underwriter data for NJN Radio for each fiscal year from FY 1999 through FY 2009. We did not have sufficient data to do an actuarially sound analysis, so we instead analyzed the number of underwriters who continued with NJN Radio in the year after they served as an underwriter in order to estimate an annual survival rate. The results can be seen in this section of the report. In terms of revenue, the average survival rate was 33.4%, and that is the projected survival rate that I used as the projected annual survival rate going forward. As seen on Table 3, I projected revenues for this underwriters contributors base through FY 2021. This projection is my estimate of the revenues to be earned in the future from the underwriters who were already underwriting NJN Radio, as of October 1, 2010. Based on our knowledge of the not-for-profit radio industry and discussions with Mike Jonas, it is our belief that non-for-profit radio stations would continue operating even if they did not receive these contributors’ donations. Therefore, I did not deduct operating expenses or deduct contributory asset charges for contributing assets, such as tangible assets, working capital and an assembled workforce asset. Also, because this is an asset for a non-for-profit entity, I did not deduct any tax payments. The annual net benefits, which equal each year’s projected revenues, are then discounted to present value using an after-tax discount rate of 10.00% (see Appendix B for an explanation).


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The present value of the discounted cash flows generated by the Underwriters Base Asset, as of October 1, 2010, is $46,893, which is the value of this asset. The estimated remaining useful life of this asset is about 11 years.

Fair Market Value: $46,893


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Year Sum

1999 5 6,897$ 2000 7 28,490 1 1,170$ 17.0%2001 9 23,500 0 0 0.0%2002 10 38,350 5 11,000 46.8%2003 16 78,204 5 16,235 42.3%2004 27 194,489 10 55,510 71.0%2005 31 205,644 11 38,734 19.9%2006 26 125,242 9 48,652 23.7%2007 21 104,301 6 36,678 29.3%2008 19 135,612 9 68,373 65.6%2009 22 103,017 3 24,540 18.1%

Average: 33.4%Median: 26.5%

NJN Radio

UnderwriterCount

# of Underwriters that Survived

from Prev. Year

Underwriter Revenue that Survived from

Prev. Year

Revenue Survival

%

Fiscal Year1 Total Revenue

EBITDA Margin Tax

After Tax Cash Flow

Capital Charges Net Benefit

Present Value at 10.00%

2011 $25,828 $25,828 $0 $25,828 $0 $25,828 $24,9212012 17,236 17,236 - 17,236 - 17,236 15,300 2013 5,757 5,757 - 5,757 - 5,757 4,646 2014 1,923 1,923 - 1,923 - 1,923 1,411 2015 642 642 - 642 - 642 428 2016 214 214 - 214 - 214 130 2017 72 72 - 72 - 72 39 2018 24 24 - 24 - 24 12 2019 8 8 - 8 - 8 4 2020 3 3 - 3 - 3 1 2021 1 1 - 1 - 1 0 2022 0 0 - 0 - 0 0

Total Present Value of Net Benefits: $46,893

1 Fiscal Years Ending June 30.

Table 3

State of New Jersey Radio StationsValuation of Underwriters Base Asset

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EXHIBIT A

EXHIBIT A WARA ANALYSIS

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WEIGHTED AVERAGE RETURN ON ASSETS ANALYSIS

In considering the discount rates to use on the intangible assets in this report, I began by considering

the after-tax Weighted Average Cost of Capital (“WACC”) for the radio stations of NJPBA.

Because the fair market value report of the nine subject NJPBA radio stations used only a market

valuation approach, not an income valuation approach, there was no WACC determined for the radio

stations in that report.

I did a valuation of commercial radio stations and commercial radio networks in another valuation

report, as of October 1, 2010, in which an income valuation approach was used. The after-tax

WACC in that report was 8.35%. I think that is the appropriate WACC to use in this report.

I then used a Weighted Average Return on Assets (“WARA”) to reconcile the overall WACC to the

returns on the assets that constitute this business enterprise.

Weighted Average Return on Assets (“WARA”)

The WARA for the Consumer Division can be seen on Table A-4. The value-weighted after-tax

returns on assets sum to 8.350%, which is my estimated after-tax WACC.

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AssetValue

Percentageof Value

After-Tax Rate ofReturn WARA Remaining Life

Tangible Assets $692,921 16.14% 6.00% 0.97% Varies by Category

FCC Licenses 2,658,000 61.93% 8.00% 4.95% Indefinite

Contributors Base Asset 51,587 1.20% 10.00% 0.12% 14 years

Underwriters Base Asset 46,893 1.09% 10.00% 0.11% 11 years

Goodwill 842,599 19.63% 11.20% 2.20% Indefinite

Total $4,292,000 100.00% 8.35%

Table A-1

Weighted Average Return on Assets

BIA/Kelsey

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EXHIBIT B

EXHIBIT B QUALIFICATIONS

Qualifications

BIA/Kelsey

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QUALIFICATIONS Qualifications

Of William Redpath, ASA, CFA, CIPM, CPA, ABV

William Redpath is a Vice President for BIA/Kelsey, a financial and strategic consulting firm with an expertise in the appraisal of broadcasting, cable, and telecommunications properties and preparation of financial presentations for communications clients. Prior to joining BIA/Kelsey in 1985, Mr. Redpath was a Senior Financial Analyst with NBC in New York. Mr. Redpath earned his B.A. degree in Economics and Political Science from Indiana University and his M.B.A. from The University of Chicago. After completing his formal education, Mr. Redpath was a staff auditor in the Cincinnati office of Arthur Andersen & Co. from 1980 to 1982. Subsequent to that, he was Assistant Financial Manager of WISH-TV, Indianapolis. He then joined the Internal Audit Department at ABC, New York, where he worked on numerous audits, including those of WXYZ(AM) (now WXYT), WRIF(FM) and WXYZ(TV), Detroit, after which he joined NBC. Mr. Redpath has prepared hundreds of valuations of business enterprises, privately-held equity interests, and purchase price allocations for financial and tax reporting purposes. He has been an expert witness in numerous litigations. He has authored articles for the BCFM Journal and other professional journals on intangible asset valuation. He has testified in state courts, United States District Court and United States Bankruptcy Court on valuation matters. Mr. Redpath is a Certified Public Accountant licensed in the Commonwealth of Virginia. He is a member of the American Institute of Certified Public Accountants, from which he has earned the Accredited in Business Valuation (ABV) designation. He is also an Accredited Senior Appraiser (ASA) in Business Valuation with the American Society of Appraisers, a Chartered Financial Analyst (CFA), and he holds the Certificate in Investment Performance Measurement (CIPM) designation from the CFA Institute.

Qualifications

BIA/Kelsey

29

Qualifications Of

Geoffrey C. Price

Geoffrey C. Price is a Vice President for BIA/Kelsey, a financial and strategic consulting firm specializing in the fair market valuations, asset appraisals, strategic analyses, and business plans of broadcast and telecommunications properties. In his current position at BIA/Kelsey, Mr. Price is responsible for the managing and operating of the company’s nationwide leading Consulting Group. Mr. Price has been at BIA/Kelsey since 1988 and has appraised hundreds of media and telecommunications properties worth in aggregate in the tens of billions of dollars. As a Vice President with BIA/Kelsey, Mr. Price has been responsible for the preparation of asset appraisals, valuation studies, strategic consulting assignments, and litigation support for clients in the communications and broadcast industries. He has also been responsible at BIA/Kelsey for assisting many publicly traded and privately held broadcast companies with their valuation needs associated with FASB 141/142. In addition, Mr. Price is part of the business development team at BIA/Kelsey and is responsible for the client relationships with many of the largest broadcast companies nationwide. Mr. Price’s appraisal and valuation experience is diverse, including reports for firms in the cellular, paging, SMR, cable, print, tower, and broadcast industries. Prior to joining BIA/Kelsey, Mr. Price was employed by ADT Security Systems, Inc. in its Accounting Center located in Alexandria, Virginia. Mr. Price earned his B.S. degree in Finance from Virginia Polytechnic Institute and State University in Blacksburg, Virginia. Mr. Price received his M.B.A. from George Mason University in Fairfax, Virginia.

appraisal of the intangible assets of the … arrive at an opinion as to the fair market valu e of...

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