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Threshold Sports - Valuation of the Company - Discounted Cash Flow

Autor:   •  April 7, 2011  •  Study Guide  •  413 Words (2 Pages)  •  1,221 Views

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Summary:

The case in study takes a peer into the dilemma facing Threshold Sports. The situation at hand has the company at the crossroad. The companies founders David Chauner and Gerard Casale Jr. are trying to decide how they will take the company to the next level. The company is in need of $500 to bring their vision to fruition. The problem is they are not certain as to how to go about ascertaining this so they have set up a meet with Mr. Firstborn a consultant who is also a member of the board. The company is a marketing and event planning company which targets the US cycling market. Their aim is to increase the cycling industry attraction to levels similar of those in the European arena.

Assumptions:

Risk free rate that will be used is 6% this was chosen as a bench mark seeing that the capital of this capacity is similar to a 30 year loan so the parity will be with that of a 30 year US treasury security.

The cooperate tax rate will be 40%

Analysis

Valuation of the Company - Discounted Cash Flow

The method chosen for the company valuation is the discounted cash flow model. It was a generous decision, seeing that the company base its prospect on its growth potential than its current position. Its high level of intangibles and its low levels of fixed assets create a difficult situation for the company to employ the much more suited option of debt. The company's primary motivation at this point of time is to create more of a demand and establish a brand. With the dramatic increase of bicycle sale and the recent Tour de France win by Lance Armstrong the sport has drastically grown in popularity. To add to this new surge the company founders hope their expertise and passion will be enough to create a lucrative market which will in time mimic that of Europe.

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