netscape_valuation_for_ipo...pv_of_fcfs
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Exhibit TN-1 Discounted Cash Flow Valuation of Netscape Communications Corporation
Actual1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Revenues g=55% $16,625 $25,790 $40,007 $62,061 $96,272 $149,342 $231,666 $359,372 $557,476 $864,785 $1,341,497Cost of Goods Sold 10.4% 1,736 2,693 4,177 6,480 10,051 15,592 24,188 37,521 58,205 90,290 140,062Gross Profit 14,890 23,097 35,830 55,581 86,220 133,749 207,478 321,851 499,271 774,495 1,201,435
Research and development 36.8% 6,115 9,486 14,715 22,827 35,411 54,931 85,211 132,184 205,051 318,085 493,430Other operating expenses 13,449 18,284 24,362 31,585 39,370 46,138 48,405 75,088 116,481 180,691 280,297
Operating income (4,675) (4,672) (3,247) 1,169 11,440 32,680 73,862 114,579 177,739 275,719 427,708Taxes 0 0 0 0 5 11,111 25,113 38,957 60,431 93,744 145,421Net income $(4,675) $(4,672) $(3,247) $1,169 $11,435 $21,569 $48,749 $75,622 $117,308 $181,975 $282,287
Cumulative tax loss carry - $(4,675) $(9,347) $(12,594) $(11,426) 0 0 0 0 0 0 0 forward
Capital expenduture 45.8% $7,618 $10,012 $12,731 $15,404 $17,157 $16,161 $25,070 $38,889 $60,327 $93,582 $145,170Depreciation 918 1,424 2,209 3,427 5,316 8,246 12,792 19,843 30,782 47,751 74,073Change NWC 0 0 0 0 0 0 0 0 0 0 0
Free cash flows $(11,375) $(13,260) $(13,769) $(10,809) $(406) $13,654 $36,471 $56,576 $87,763 $136,144 $211,190Terminal value FCF1/(K-g) 2,745,481
Present value of cash flows $173,587Present value of terminal value $883,971Total present value $1,057,558 $ 1bil. Market Value vs. $16mil. Book Value
Current shares outstanding 32,764New shares (1995 IPO) 5,000Total shares 37,764Value per share $28.00
Assumptions
Riskless rate 6.71% Cost of revenues 10.4% of salesDiscounted rate 12.00% R&D 36.8% of revenuesGrowth rate of sales 55.12% Other operating expenses Decline to 20.9% of sales by 2001Terminal value perpetual Capital expenditures 45.8% Decline to 10.8% of revenues by 2001 growth rate 4.00% Depreciation 5.5% of revenuesChanges in net working capital 0.00%
Forecast