Copy of Compass Records
12
BASE CASE COMPASS RECORDS Discounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit Assumptions ASSUMPTIONS Sales projections Units Pricing Marketing and promotion U.S. sales 5,000 U.S. wholesale unit price $11.45 Print advertising $3,000 U.K., Ireland, Europe sales 2,000 Less distribution fee $9.05 Posters and photos 500 Japan, New Zealand, Australi 1,000 EUR 7.00 E-card mailings 1,000 Canada sales 500 Euro/US$ exchange rate 1.224 Independent radio promoter 2,500 Units sold by artist 1,500 $8.57 Retail placement 5,000 Total–projected sales (units 10,000 Japan, NZ, Australia price ( $6.50 Total marketing & promo co $12,000 Canada price (US$) $7.00 Weighted average cost of cap 12% Unit price for artist-sold u $6.00 CD mail-out units 2,000 Distribution fee 21% Cost per mail-out unit per $0.50 Postage and collateral per $2.00 Total cost for CD mail-out $5,000 CASH FLOWS Own License Years Years 0 1 2 3 0 1 2 3 Annual percentage sold in percent (totals 100%) 65% 25% 10% 0% 65% 25% 10% U.S. forecasted units sold 0 3,250 1,250 500 0 3,250 1,250 500 U.K., Ireland, Europe forecasted unit 0 1,300 500 200 0 1,300 500 200 Japan, New Zealand, Australia forecas 0 650 250 100 0 650 250 100 Canada forecasted units sold 0 325 125 50 0 325 125 50 Units sold by artist 0 975 375 150 0 975 375 150 Total sales $0 $52,886 $20,341 $8,136 $0 $52,886 $20,341 $8,136 Per unit Per unit Cost of goods sold $0.90 $0 $5,850 $2,250 $900 $0.90 $0 $5,850 $2,250 $900 Mechanical royalties $0.85 $0 $4,696 $1,806 $723 $0.85 $0 $4,696 $1,806 $723 Recording-artist royalties $1.45 $0 $8,011 $3,081 $1,233 $1.75 $0 $9,669 $3,719 $1,488 Recoupables not recovered $8,675 $9,125 Promotion & marketing not recoupable $11,000 $0 $0 $0 $11,000 $0 $0 $0 Loss on inventory $2,295 $2,295 Upfront fee (advance) $0 $0 $0 $0 $3,000 $0 $0 $0 Taxable income ($11,000) $39,025 $15,010 ($4,966) ($14,000) $32,671 $12,566 ($6,394) Taxes(put rate in box) 40% $4,400 ($15,610) ($6,004) $1,986 $5,600 ($13,069) ($5,026) $2,557 Net operating profit after tax ($6,600) $23,415 $9,006 ($2,980) ($8,400) $19,603 $7,540 ($3,836) Change in inventory ($7,341) $3,026 $1,121 $900 ($7,342) $3,026 $1,121 $900 Change in recoupables ($21,000) $8,011 $3,081 $1,233 ($24,000) $9,669 $3,719 $1,488 Free cash flow ($34,941) $34,453 $13,208 $10,123 ($39,742) $32,298 $12,379 $9,971 NPV Own $13,554 License $6,061 IRR 40.3% 23.1% WORKING CAPITAL Own License Years Years 0 1 2 3 0 1 2 3 Assets Assets Inventory, incl. overage @.. 30% $7,342 $4,316 $3,195 $2,295 $7,342 $4,316 $3,195 $2,295 Recoupables 21,000 12,989 9,908 8,675 24,000 14,331 10,613 9,125 $10,970 $11,420 Recoupables Recoupables Production costs $15,000 Production costs $15,000 Marketing & promotion (1/2) 6,000 Marketing & promotion (1/2) 6,000 Advance 0 Advance 3,000 Total $21,000 Total $24,000 U.K., Ireland, Europe price ( U.K., Ireland, Europe price (
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Transcript of Copy of Compass Records
BASE CASE
COMPASS RECORDSDiscounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit AssumptionsASSUMPTIONS Sales projections U.S. sales U.K., Ireland, Europe sales Japan, New Zealand, Australia sales Canada sales Units sold by artist Totalprojected sales (units) Weighted average cost of capital Units 5,000 2,000 1,000 500 1,500 10,000 12% Pricing U.S. wholesale unit price Less distribution fee U.K., Ireland, Europe price (euro) Euro/US$ exchange rate U.K., Ireland, Europe price (US$) Japan, NZ, Australia price (US$) Canada price (US$) Unit price for artist-sold units Distribution fee Marketing and promotion Print advertising Posters and photos E-card mailings Independent radio promoter Retail placement Total marketing & promo cost CD mail-out units Cost per mail-out unit per unit Postage and collateral per unit Total cost for CD mail-out
$11.45 $9.05 EUR 7.00 1.224 $8.57 $6.50 $7.00 $6.00 21%
$3,000 500 1,000 2,500 5,000 $12,000 2,000 $0.50 $2.00 $5,000
CASH FLOWS Own Years 0 Annual percentage sold in percent (totals 100%) U.S. forecasted units sold U.K., Ireland, Europe forecasted units sold Japan, New Zealand, Australia forecasted units sold Canada forecasted units sold Units sold by artist Total sales Cost of goods sold Mechanical royalties Recording-artist royalties Recoupables not recovered Promotion & marketing not recoupable Loss on inventory Upfront fee (advance) Taxable income Taxes(put rate in box) Net operating profit after tax Change in inventory Change in recoupables Free cash flow NPV IRR WORKING CAPITAL Own Years 0 Assets Inventory, incl. overage @... Recoupables Recoupables Production costs Marketing & promotion (1/2) Advance Total 30% $7,342 21,000 1 $4,316 12,989 2 $3,195 9,908 3 Assets $2,295 8,675 $10,970 $7,342 24,000 $4,316 14,331 $3,195 10,613 $2,295 9,125 $11,420 $15,000 6,000 3,000 $24,000 License Years 0 1 2 3 Own Per unit $0.90 $0.85 $1.45 0 0 0 0 0 $0 $0 $0 $0 $11,000 $0 ($11,000) $4,400 ($6,600) ($7,341) ($21,000) ($34,941) $13,554 40.3% 1 65% 3,250 1,300 650 325 975 $52,886 $5,850 $4,696 $8,011 $0 $0 $39,025 ($15,610) $23,415 $3,026 $8,011 $34,453 2 25% 1,250 500 250 125 375 $20,341 $2,250 $1,806 $3,081 $0 $0 $15,010 ($6,004) $9,006 $1,121 $3,081 $13,208 3 10% 500 200 100 50 150 $8,136 $900 $723 $1,233 $8,675 $0 $2,295 $0 ($4,966) $1,986 ($2,980) $900 $1,233 $10,123 License Per unit $0.90 $0.85 $1.75 License Years 0 0% 0 0 0 0 0 $0 $0 $0 $0 $11,000 $3,000 ($14,000) $5,600 ($8,400) ($7,342) ($24,000) ($39,742) $6,061 23.1% 1 65% 3,250 1,300 650 325 975 $52,886 $5,850 $4,696 $9,669 $0 $0 $32,671 ($13,069) $19,603 $3,026 $9,669 $32,298 2 25% 1,250 500 250 125 375 $20,341 $2,250 $1,806 $3,719 $0 $0 $12,566 ($5,026) $7,540 $1,121 $3,719 $12,379 3 10% 500 200 100 50 150 $8,136 $900 $723 $1,488 $9,125 $0 $2,295 $0 ($6,394) $2,557 ($3,836) $900 $1,488 $9,971
40%
$15,000 6,000 0 $21,000
Recoupables Production costs Marketing & promotion (1/2) Advance Total
BASE CASE
COMPASS RECORDSDiscounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit AssumptionsASSUMPTIONS Sales projections U.S. sales U.K., Ireland, Europe sales Japan, New Zealand, Australia sales Canada sales Units sold by artist Totalprojected sales (units) Weighted average cost of capital Units 8,000 2,000 1,000 500 1,500 13,000 12% Pricing U.S. wholesale unit price Less distribution fee U.K., Ireland, Europe price (euro) Euro/US$ exchange rate U.K., Ireland, Europe price (US$) Japan, NZ, Australia price (US$) Canada price (US$) Unit price for artist-sold units Distribution fee Marketing and promotion Print advertising Posters and photos E-card mailings Independent radio promoter Retail placement Total marketing & promo cost CD mail-out units Cost per mail-out unit per unit Postage and collateral per unit Total cost for CD mail-out
$11.45 $9.05 EUR 7.00 1.224 $8.57 $6.50 $7.00 $6.00 21%
$3,000 500 1,000 2,500 5,000 $12,000 2,000 $0.50 $2.00 $5,000
CASH FLOWS Own Years 0 Annual percentage sold in percent (totals 100%) U.S. forecasted units sold U.K., Ireland, Europe forecasted units sold Japan, New Zealand, Australia forecasted units sold Canada forecasted units sold Units sold by artist Total sales Cost of goods sold Mechanical royalties Recording-artist royalties Recoupables not recovered Promotion & marketing not recoupable Loss on inventory Upfront fee (advance) Taxable income Taxes(put rate in box) Net operating profit after tax Change in inventory Change in recoupables Free cash flow NPV IRR WORKING CAPITAL Own Years 0 Assets Inventory, incl. overage @... Recoupables Recoupables Production costs Marketing & promotion (1/2) Advance Total 30% $9,623 21,000 1 $5,720 10,161 2 $4,275 5,993 3 Assets $3,105 4,325 $7,430 $9,623 24,000 $5,720 10,919 $4,275 5,888 $3,105 3,875 $6,980 $15,000 6,000 3,000 $24,000 License Years 0 1 2 3 Own Per unit $0.90 $0.85 $1.45 0 0 0 0 0 $0 $0 $0 $0 $11,000 $0 ($11,000) $4,400 ($6,600) ($9,623) ($21,000) ($37,223) $25,454 63.3% 1 65% 5,200 1,300 650 325 975 $70,525 $7,605 $6,354 $10,839 $0 $0 $52,081 ($20,833) $31,249 $3,904 $10,839 $45,991 2 25% 2,000 500 250 125 375 $27,125 $2,925 $2,444 $4,169 $0 $0 $20,031 ($8,013) $12,019 $1,445 $4,169 $17,632 3 10% 800 200 100 50 150 $10,850 $1,170 $978 $1,668 $4,325 $0 $3,105 $0 $583 ($233) $350 $1,170 $1,668 $10,617 License Per unit $0.90 $0.85 $1.75 License Years 0 0% 0 0 0 0 0 $0 $0 $0 $0 $11,000 $3,000 ($14,000) $5,600 ($8,400) ($9,623) ($24,000) ($42,023) $16,709 42.0% 1 65% 5,200 1,300 650 325 975 $70,525 $7,605 $6,354 $13,081 $0 $0 $43,485 ($17,394) $26,091 $3,904 $13,081 $43,076 2 25% 2,000 500 250 125 375 $27,125 $2,925 $2,444 $5,031 $0 $0 $16,725 ($6,690) $10,035 $1,445 $5,031 $16,511 3 10% 800 200 100 50 150 $10,850 $1,170 $978 $2,013 $3,875 $0 $3,105 $0 ($290) $116 ($174) $1,170 $2,013 $9,989
40%
$15,000 6,000 0 $21,000
Recoupables Production costs Marketing & promotion (1/2) Advance Total
BASE CASE
COMPASS RECORDSDiscounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit AssumptionsASSUMPTIONS Sales projections U.S. sales U.K., Ireland, Europe sales Japan, New Zealand, Australia sales Canada sales Units sold by artist Totalprojected sales (units) Weighted average cost of capital Units 5,000 2,000 1,000 500 1,500 10,000 12% Pricing U.S. wholesale unit price Less distribution fee U.K., Ireland, Europe price (euro) Euro/US$ exchange rate U.K., Ireland, Europe price (US$) Japan, NZ, Australia price (US$) Canada price (US$) Unit price for artist-sold units Distribution fee Marketing and promotion Print advertising Posters and photos E-card mailings Independent radio promoter Retail placement Total marketing & promo cost CD mail-out units Cost per mail-out unit per unit Postage and collateral per unit Total cost for CD mail-out
$11.45 $9.05 EUR 7.00 1.224 $8.57 $6.50 $7.00 $6.00 21%
$3,000 500 1,000 2,500 5,000 $12,000 2,000 $0.50 $2.00 $5,000
CASH FLOWS Own Years 0 Annual percentage sold in percent (totals 100%) U.S. forecasted units sold U.K., Ireland, Europe forecasted units sold Japan, New Zealand, Australia forecasted units sold Canada forecasted units sold Units sold by artist Total sales Cost of goods sold Mechanical royalties Recording-artist royalties Recoupables not recovered Promotion & marketing not recoupable Loss on inventory Upfront fee (advance) Taxable income Taxes(put rate in box) Net operating profit after tax Change in inventory Change in recoupables Free cash flow NPV IRR WORKING CAPITAL Own Years 0 Assets Inventory, incl. overage @... Recoupables Recoupables Production costs Marketing & promotion (1/2) Advance Total 30% $7,342 26,000 1 $4,316 17,989 2 $3,195 14,908 3 Assets $2,295 13,675 $15,970 $7,342 29,000 $4,316 19,331 $3,195 15,613 $2,295 14,125 $16,420 $20,000 6,000 3,000 $29,000 License Years 0 1 2 3 Own Per unit $0.90 $0.85 $1.45 0 0 0 0 0 $0 $0 $0 $0 $11,000 $0 ($11,000) $4,400 ($6,600) ($7,341) ($26,000) ($39,941) $9,977 29.8% 1 65% 3,250 1,300 650 325 975 $52,886 $5,850 $4,696 $8,011 $0 $0 $39,025 ($15,610) $23,415 $3,026 $8,011 $34,453 2 25% 1,250 500 250 125 375 $20,341 $2,250 $1,806 $3,081 $0 $0 $15,010 ($6,004) $9,006 $1,121 $3,081 $13,208 3 10% 500 200 100 50 150 $8,136 $900 $723 $1,233 $13,675 $0 $2,295 $0 ($9,966) $3,986 ($5,980) $900 $1,233 $12,123 License Per unit $0.90 $0.85 $1.75 License Years 0 0% 0 0 0 0 0 $0 $0 $0 $0 $11,000 $3,000 ($14,000) $5,600 ($8,400) ($7,342) ($29,000) ($44,742) $2,485 15.9% 1 65% 3,250 1,300 650 325 975 $52,886 $5,850 $4,696 $9,669 $0 $0 $32,671 ($13,069) $19,603 $3,026 $9,669 $32,298 2 25% 1,250 500 250 125 375 $20,341 $2,250 $1,806 $3,719 $0 $0 $12,566 ($5,026) $7,540 $1,121 $3,719 $12,379 3 10% 500 200 100 50 150 $8,136 $900 $723 $1,488 $14,125 $0 $2,295 $0 ($11,394) $4,557 ($6,836) $900 $1,488 $11,971
40%
$20,000 6,000 0 $26,000
Recoupables Production costs Marketing & promotion (1/2) Advance Total
BASE CASE
COMPASS RECORDSDiscounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit AssumptionsASSUMPTIONS Sales projections U.S. sales U.K., Ireland, Europe sales Japan, New Zealand, Australia sales Canada sales Units sold by artist Totalprojected sales (units) Weighted average cost of capital Units 2,000 2,000 1,000 500 1,500 7,000 12% Pricing U.S. wholesale unit price Less distribution fee U.K., Ireland, Europe price (euro) Euro/US$ exchange rate U.K., Ireland, Europe price (US$) Japan, NZ, Australia price (US$) Canada price (US$) Unit price for artist-sold units Distribution fee Marketing and promotion Print advertising Posters and photos E-card mailings Independent radio promoter Retail placement Total marketing & promo cost CD mail-out units Cost per mail-out unit per unit Postage and collateral per unit Total cost for CD mail-out
$11.45 $9.05 EUR 7.00 1.224 $8.57 $6.50 $7.00 $6.00 21%
$3,000 500 1,000 2,500 5,000 $12,000 2,000 $0.50 $2.00 $5,000
CASH FLOWS Own Years 0 Annual percentage sold in percent (totals 100%) U.S. forecasted units sold U.K., Ireland, Europe forecasted units sold Japan, New Zealand, Australia forecasted units sold Canada forecasted units sold Units sold by artist Total sales Cost of goods sold Mechanical royalties Recording-artist royalties Recoupables not recovered Promotion & marketing not recoupable Loss on inventory Upfront fee (advance) Taxable income Taxes(put rate in box) Net operating profit after tax Change in inventory Change in recoupables Free cash flow NPV IRR WORKING CAPITAL Own Years 0 Assets Inventory, incl. overage @... Recoupables Recoupables Production costs Marketing & promotion (1/2) Advance Total 30% $5,060 21,000 1 $2,912 15,816 2 $2,115 13,823 3 Assets $1,485 13,025 $14,510 $5,060 24,000 $2,912 17,744 $2,115 15,338 $1,485 14,375 $15,860 $15,000 6,000 3,000 $24,000 License Years 0 1 2 3 Own Per unit $0.90 $0.85 $1.45 0 0 0 0 0 $0 $0 $0 $0 $11,000 $0 ($11,000) $4,400 ($6,600) ($5,060) ($21,000) ($32,660) $1,654 15.5% 1 65% 1,300 1,300 650 325 975 $35,248 $4,095 $3,039 $5,184 $0 $0 $25,969 ($10,388) $15,581 $2,149 $5,184 $22,914 2 25% 500 500 250 125 375 $13,557 $1,575 $1,169 $1,994 $0 $0 $9,988 ($3,995) $5,993 $797 $1,994 $8,783 3 10% 200 200 100 50 150 $5,423 $630 $468 $798 $13,025 $0 $1,485 $0 ($10,515) $4,206 ($6,309) $630 $798 $9,629 License Per unit $0.90 $0.85 $1.75 License Years 0 0% 0 0 0 0 0 $0 $0 $0 $0 $11,000 $3,000 ($14,000) $5,600 ($8,400) ($5,060) ($24,000) ($37,460) ($4,587) 3.5% 1 65% 1,300 1,300 650 325 975 $35,248 $4,095 $3,039 $6,256 $0 $0 $21,858 ($8,743) $13,115 $2,149 $6,256 $21,520 2 25% 500 500 250 125 375 $13,557 $1,575 $1,169 $2,406 $0 $0 $8,407 ($3,363) $5,044 $797 $2,406 $8,247 3 10% 200 200 100 50 150 $5,423 $630 $468 $963 $14,375 $0 $1,485 $0 ($12,497) $4,999 ($7,498) $630 $963 $9,954
40%
$15,000 6,000 0 $21,000
Recoupables Production costs Marketing & promotion (1/2) Advance Total
BEST CASE
COMPASS RECORDSDiscounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit AssumptionsASSUMPTIONS Sales projections U.S. sales U.K., Ireland, Europe sales Japan, New Zealand, Australia sales Canada sales Units sold by artist Totalprojected sales (units) Weighted average cost of capital Units 5,000 2,000 1,000 500 1,500 10,000 12% Pricing U.S. wholesale unit price Less distribution fee U.K., Ireland, Europe price (euro) Euro/US$ exchange rate U.K., Ireland, Europe price (US$) Japan, NZ, Australia price (US$) Canada price (US$) Unit price for artist-sold units Distribution fee Marketing and promotion Print advertising Posters and photos E-card mailings Independent radio promoter Retail placement Total marketing & promo cost CD mail-out units Cost per mail-out unit per unit Postage and collateral per unit Total cost for CD mail-out
$11.45 $9.05 EUR 7.00 1.224 $8.57 $6.50 $7.00 $6.00 21%
$3,000 500 1,000 2,500 5,000 $12,000 2,000 $0.50 $2.00 $5,000
CASH FLOWS Own Years 0 Annual percentage sold in percent (totals 100%) U.S. forecasted units sold U.K., Ireland, Europe forecasted units sold Japan, New Zealand, Australia forecasted units sold Canada forecasted units sold Units sold by artist Total sales Cost of goods sold Mechanical royalties Recording-artist royalties Recoupables not recovered Promotion & marketing not recoupable Loss on inventory Upfront fee (advance) Taxable income Taxes(put rate in box) Net operating profit after tax Change in inventory Change in recoupables Free cash flow NPV IRR WORKING CAPITAL Own Years 0 Assets Inventory, incl. overage @... Recoupables Recoupables Production costs Marketing & promotion (1/2) Advance Total 30% $9,036 21,000 1 $3,530 11,140 2 $2,745 9,291 3 Assets $2,295 8,675 $10,970 $9,036 24,000 $3,530 12,100 $2,745 9,869 $2,295 9,125 $11,420 $15,000 6,000 3,000 $24,000 License Years 0 1 2 3 Own Per unit $0.90 $0.85 $1.45 0 0 0 0 0 $0 $0 $0 $0 $11,000 $0 ($11,000) $4,400 ($6,600) ($9,036) ($21,000) ($36,636) $14,386 45.1% 1 80% 4,000 1,600 800 400 1,200 $65,091 $7,200 $5,780 $9,860 $0 $0 $48,031 ($19,212) $28,818 $5,506 $9,860 $44,184 2 15% 750 300 150 75 225 $12,205 $1,350 $1,084 $1,849 $0 $0 $9,006 ($3,602) $5,403 $785 $1,849 $8,037 3 5% 250 100 50 25 75 $4,068 $450 $361 $616 $8,675 $0 $2,295 $0 ($7,968) $3,187 ($4,781) $450 $616 $7,255 License Per unit $0.90 $0.85 $1.75 License Years 0 0% 0 0 0 0 0 $0 $0 $0 $0 $11,000 $3,000 ($14,000) $5,600 ($8,400) ($9,036) ($24,000) ($41,436) $6,832 25.8% 1 80% 4,000 1,600 800 400 1,200 $65,091 $7,200 $5,780 $11,900 $0 $0 $40,211 ($16,084) $24,126 $5,506 $11,900 $41,532 2 15% 750 300 150 75 225 $12,205 $1,350 $1,084 $2,231 $0 $0 $7,540 ($3,016) $4,524 $785 $2,231 $7,540 3 5% 250 100 50 25 75 $4,068 $450 $361 $744 $9,125 $0 $2,295 $0 ($8,907) $3,563 ($5,344) $450 $744 $7,270
40%
$15,000 6,000 0 $21,000
Recoupables Production costs Marketing & promotion (1/2) Advance Total
BEST CASE
COMPASS RECORDSDiscounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit AssumptionsASSUMPTIONS Sales projections U.S. sales U.K., Ireland, Europe sales Japan, New Zealand, Australia sales Canada sales Units sold by artist Totalprojected sales (units) Weighted average cost of capital Units 8,000 2,000 1,000 500 1,500 13,000 12% Pricing U.S. wholesale unit price Less distribution fee U.K., Ireland, Europe price (euro) Euro/US$ exchange rate U.K., Ireland, Europe price (US$) Japan, NZ, Australia price (US$) Canada price (US$) Unit price for artist-sold units Distribution fee Marketing and promotion Print advertising Posters and photos E-card mailings Independent radio promoter Retail placement Total marketing & promo cost CD mail-out units Cost per mail-out unit per unit Postage and collateral per unit Total cost for CD mail-out
$11.45 $9.05 EUR 7.00 1.224 $8.57 $6.50 $7.00 $6.00 21%
$3,000 500 1,000 2,500 5,000 $12,000 2,000 $0.50 $2.00 $5,000
CASH FLOWS Own Years 0 Annual percentage sold in percent (totals 100%) U.S. forecasted units sold U.K., Ireland, Europe forecasted units sold Japan, New Zealand, Australia forecasted units sold Canada forecasted units sold Units sold by artist Total sales Cost of goods sold Mechanical royalties Recording-artist royalties Recoupables not recovered Promotion & marketing not recoupable Loss on inventory Upfront fee (advance) Taxable income Taxes(put rate in box) Net operating profit after tax Change in inventory Change in recoupables Free cash flow NPV IRR WORKING CAPITAL Own Years 0 Assets Inventory, incl. overage @... Recoupables Recoupables Production costs Marketing & promotion (1/2) Advance Total 30% $11,844 21,000 1 $4,705 7,660 2 $3,690 5,159 3 Assets $3,105 4,325 $7,430 $11,844 24,000 $4,705 7,900 $3,690 4,881 $3,105 3,875 $6,980 $15,000 6,000 3,000 $24,000 License Years 0 1 2 3 Own Per unit $0.90 $0.85 $1.45 0 0 0 0 0 $0 $0 $0 $0 $11,000 $0 ($11,000) $4,400 ($6,600) ($11,844) ($21,000) ($39,444) $26,569 71.2% 1 80% 6,400 1,600 800 400 1,200 $86,800 $9,360 $7,820 $13,340 $0 $0 $64,100 ($25,640) $38,460 $7,139 $13,340 $58,939 2 15% 1,200 300 150 75 225 $16,275 $1,755 $1,466 $2,501 $0 $0 $12,019 ($4,808) $7,211 $1,015 $2,501 $10,727 3 5% 400 100 50 25 75 $5,425 $585 $489 $834 $4,325 $0 $3,105 $0 ($3,424) $1,370 ($2,054) $585 $834 $6,795 License Per unit $0.90 $0.85 $1.75 License Years 0 0% 0 0 0 0 0 $0 $0 $0 $0 $11,000 $3,000 ($14,000) $5,600 ($8,400) ($11,844) ($24,000) ($44,244) $17,741 47.2% 1 80% 6,400 1,600 800 400 1,200 $86,800 $9,360 $7,820 $16,100 $0 $0 $53,520 ($21,408) $32,112 $7,139 $16,100 $55,351 2 15% 1,200 300 150 75 225 $16,275 $1,755 $1,466 $3,019 $0 $0 $10,035 ($4,014) $6,021 $1,015 $3,019 $10,055 3 5% 400 100 50 25 75 $5,425 $585 $489 $1,006 $3,875 $0 $3,105 $0 ($3,635) $1,454 ($2,181) $585 $1,006 $6,390
40%
$15,000 6,000 0 $21,000
Recoupables Production costs Marketing & promotion (1/2) Advance Total
BEST CASE
COMPASS RECORDSDiscounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit AssumptionsASSUMPTIONS Sales projections U.S. sales U.K., Ireland, Europe sales Japan, New Zealand, Australia sales Canada sales Units sold by artist Totalprojected sales (units) Weighted average cost of capital Units 2,000 2,000 1,000 500 1,500 7,000 12% Pricing U.S. wholesale unit price Less distribution fee U.K., Ireland, Europe price (euro) Euro/US$ exchange rate U.K., Ireland, Europe price (US$) Japan, NZ, Australia price (US$) Canada price (US$) Unit price for artist-sold units Distribution fee Marketing and promotion Print advertising Posters and photos E-card mailings Independent radio promoter Retail placement Total marketing & promo cost CD mail-out units Cost per mail-out unit per unit Postage and collateral per unit Total cost for CD mail-out
$11.45 $9.05 EUR 7.00 1.224 $8.57 $6.50 $7.00 $6.00 21%
$3,000 500 1,000 2,500 5,000 $12,000 2,000 $0.50 $2.00 $5,000
CASH FLOWS Own Years 0 Annual percentage sold in percent (totals 100%) U.S. forecasted units sold U.K., Ireland, Europe forecasted units sold Japan, New Zealand, Australia forecasted units sold Canada forecasted units sold Units sold by artist Total sales Cost of goods sold Mechanical royalties Recording-artist royalties Recoupables not recovered Promotion & marketing not recoupable Loss on inventory Upfront fee (advance) Taxable income Taxes(put rate in box) Net operating profit after tax Change in inventory Change in recoupables Free cash flow NPV IRR WORKING CAPITAL Own Years 0 Assets Inventory, incl. overage @... Recoupables Recoupables Production costs Marketing & promotion (1/2) Advance Total 30% $6,228 21,000 1 $2,356 14,620 2 $1,800 13,424 3 Assets $1,485 13,025 $14,510 $6,228 24,000 $2,356 16,300 $1,800 14,856 $1,485 14,375 $15,860 $15,000 6,000 3,000 $24,000 License Years 0 1 2 3 Own Per unit $0.90 $0.85 $1.45 0 0 0 0 0 $0 $0 $0 $0 $11,000 $0 ($11,000) $4,400 ($6,600) ($6,228) ($21,000) ($33,828) $2,204 17.1% 1 80% 1,600 1,600 800 400 1,200 $43,382 $5,040 $3,740 $6,380 $0 $0 $31,962 ($12,785) $19,177 $3,872 $6,380 $29,429 2 15% 300 300 150 75 225 $8,134 $945 $701 $1,196 $0 $0 $5,993 ($2,397) $3,596 $556 $1,196 $5,348 3 5% 100 100 50 25 75 $2,711 $315 $234 $399 $13,025 $0 $1,485 $0 ($12,512) $5,005 ($7,507) $315 $399 $7,716 License Per unit $0.90 $0.85 $1.75 License Years 0 0% 0 0 0 0 0 $0 $0 $0 $0 $11,000 $3,000 ($14,000) $5,600 ($8,400) ($6,228) ($24,000) ($38,628) ($4,077) 3.8% 1 80% 1,600 1,600 800 400 1,200 $43,382 $5,040 $3,740 $7,700 $0 $0 $26,902 ($10,761) $16,141 $3,872 $7,700 $27,713 2 15% 300 300 150 75 225 $8,134 $945 $701 $1,444 $0 $0 $5,044 ($2,018) $3,026 $556 $1,444 $5,026 3 5% 100 100 50 25 75 $2,711 $315 $234 $481 $14,375 $0 $1,485 $0 ($14,179) $5,671 ($8,507) $315 $481 $8,149
40%
$15,000 6,000 0 $21,000
Recoupables Production costs Marketing & promotion (1/2) Advance Total
BEST CASE
COMPASS RECORDSDiscounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit AssumptionsASSUMPTIONS Sales projections U.S. sales U.K., Ireland, Europe sales Japan, New Zealand, Australia sales Canada sales Units sold by artist Totalprojected sales (units) Weighted average cost of capital Units 5,000 4,000 1,000 500 1,500 12,000 12% Pricing U.S. wholesale unit price Less distribution fee U.K., Ireland, Europe price (euro) Euro/US$ exchange rate U.K., Ireland, Europe price (US$) Japan, NZ, Australia price (US$) Canada price (US$) Unit price for artist-sold units Distribution fee Marketing and promotion Print advertising Posters and photos E-card mailings Independent radio promoter Retail placement Total marketing & promo cost CD mail-out units Cost per mail-out unit per unit Postage and collateral per unit Total cost for CD mail-out
$11.45 $9.05 EUR 7.00 1.224 $8.57 $6.50 $7.00 $6.00 21%
$3,000 500 1,000 2,500 5,000 $12,000 2,000 $0.50 $2.00 $5,000
CASH FLOWS Own Years 0 Annual percentage sold in percent (totals 100%) U.S. forecasted units sold U.K., Ireland, Europe forecasted units sold Japan, New Zealand, Australia forecasted units sold Canada forecasted units sold Units sold by artist Total sales Cost of goods sold Mechanical royalties Recording-artist royalties Recoupables not recovered Promotion & marketing not recoupable Loss on inventory Upfront fee (advance) Taxable income Taxes(put rate in box) Net operating profit after tax Change in inventory Change in recoupables Free cash flow NPV IRR WORKING CAPITAL Own Years 0 Assets Inventory, incl. overage @... Recoupables Recoupables Production costs Marketing & promotion (1/2) Advance Total 30% $10,908 21,000 1 $4,313 8,820 2 $3,375 6,536 3 Assets $2,835 5,775 $8,610 $10,908 24,000 $4,313 9,300 $3,375 6,544 $2,835 5,625 $8,460 $15,000 6,000 3,000 $24,000 License Years 0 1 2 3 Own Per unit $0.90 $0.85 $1.45 0 0 0 0 0 $0 $0 $0 $0 $11,000 $0 ($11,000) $4,400 ($6,600) ($10,908) ($21,000) ($38,508) $22,010 61.6% 1 80% 4,000 3,200 800 400 1,200 $78,800 $8,640 $7,140 $12,180 $0 $0 $57,980 ($23,192) $34,788 $6,595 $12,180 $53,563 2 15% 750 600 150 75 225 $14,775 $1,620 $1,339 $2,284 $0 $0 $10,871 ($4,348) $6,523 $938 $2,284 $9,745 3 5% 250 200 50 25 75 $4,925 $540 $446 $761 $5,775 $0 $2,835 $0 ($4,986) $1,995 ($2,992) $540 $761 $6,919 License Per unit $0.90 $0.85 $1.75 License Years 0 0% 0 0 0 0 0 $0 $0 $0 $0 $11,000 $3,000 ($14,000) $5,600 ($8,400) ($10,908) ($24,000) ($43,308) $13,606 39.2% 1 80% 4,000 3,200 800 400 1,200 $78,800 $8,640 $7,140 $14,700 $0 $0 $48,320 ($19,328) $28,992 $6,595 $14,700 $50,287 2 15% 750 600 150 75 225 $14,775 $1,620 $1,339 $2,756 $0 $0 $9,060 ($3,624) $5,436 $938 $2,756 $9,130 3 5% 250 200 50 25 75 $4,925 $540 $446 $919 $5,625 $0 $2,835 $0 ($5,440) $2,176 ($3,264) $540 $919 $6,655
40%
$15,000 6,000 0 $21,000
Recoupables Production costs Marketing & promotion (1/2) Advance Total
WORST CASE
COMPASS RECORDSDiscounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit AssumptionsASSUMPTIONS Sales projections U.S. sales U.K., Ireland, Europe sales Japan, New Zealand, Australia sales Canada sales Units sold by artist Totalprojected sales (units) Weighted average cost of capital Units 5,000 2,000 1,000 500 1,500 10,000 12% Pricing U.S. wholesale unit price Less distribution fee U.K., Ireland, Europe price (euro) Euro/US$ exchange rate U.K., Ireland, Europe price (US$) Japan, NZ, Australia price (US$) Canada price (US$) Unit price for artist-sold units Distribution fee Marketing and promotion Print advertising Posters and photos E-card mailings Independent radio promoter Retail placement Total marketing & promo cost CD mail-out units Cost per mail-out unit per unit Postage and collateral per unit Total cost for CD mail-out
$11.45 $9.05 EUR 7.00 1.224 $8.57 $6.50 $7.00 $6.00 21%
$3,000 500 1,000 2,500 5,000 $12,000 2,000 $0.50 $2.00 $5,000
CASH FLOWS Own Years 0 Annual percentage sold in percent (totals 100%) U.S. forecasted units sold U.K., Ireland, Europe forecasted units sold Japan, New Zealand, Australia forecasted units sold Canada forecasted units sold Units sold by artist Total sales Cost of goods sold Mechanical royalties Recording-artist royalties Recoupables not recovered Promotion & marketing not recoupable Loss on inventory Upfront fee (advance) Taxable income Taxes(put rate in box) Net operating profit after tax Change in inventory Change in recoupables Free cash flow NPV IRR WORKING CAPITAL Own Years 0 Assets Inventory, incl. overage @... Recoupables Recoupables Production costs Marketing & promotion (1/2) Advance Total 30% $5,648 21,000 1 $3,971 14,838 2 $4,545 11,756 3 Assets $2,295 8,675 $10,970 $5,648 24,000 $3,971 16,563 $4,545 12,844 $2,295 9,125 $11,420 $15,000 6,000 3,000 $24,000 License Years 0 1 2 3 Own Per unit $0.90 $0.85 $1.45 0 0 0 0 0 $0 $0 $0 $0 $11,000 $0 ($11,000) $4,400 ($6,600) ($5,647) ($21,000) ($33,247) $12,340 34.6% 1 50% 2,500 1,000 500 250 750 $40,682 $4,500 $3,613 $6,163 $0 $0 $30,019 ($12,008) $18,012 $1,676 $6,163 $25,850 2 25% 1,250 500 250 125 375 $20,341 $2,250 $1,806 $3,081 $0 $0 $15,010 ($6,004) $9,006 ($574) $3,081 $11,513 3 25% 1,250 500 250 125 375 $20,341 $2,250 $1,806 $3,081 $8,675 $0 $2,295 $0 $4,040 ($1,616) $2,424 $2,250 $3,081 $18,725 License Per unit $0.90 $0.85 $1.75 License Years 0 0% 0 0 0 0 0 $0 $0 $0 $0 $11,000 $3,000 ($14,000) $5,600 ($8,400) ($5,648) ($24,000) ($38,048) $4,937 20.0% 1 50% 2,500 1,000 500 250 750 $40,682 $4,500 $3,613 $7,438 $0 $0 $25,132 ($10,053) $15,079 $1,676 $7,438 $24,193 2 25% 1,250 500 250 125 375 $20,341 $2,250 $1,806 $3,719 $0 $0 $12,566 ($5,026) $7,540 ($574) $3,719 $10,685 3 25% 1,250 500 250 125 375 $20,341 $2,250 $1,806 $3,719 $9,125 $0 $2,295 $0 $1,146 ($458) $688 $2,250 $3,719 $18,076
40%
$15,000 6,000 0 $21,000
Recoupables Production costs Marketing & promotion (1/2) Advance Total
WORST CASE
COMPASS RECORDSDiscounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit AssumptionsASSUMPTIONS Sales projections U.S. sales U.K., Ireland, Europe sales Japan, New Zealand, Australia sales Canada sales Units sold by artist Totalprojected sales (units) Weighted average cost of capital Units 8,000 2,000 1,000 500 1,500 13,000 12% Pricing U.S. wholesale unit price Less distribution fee U.K., Ireland, Europe price (euro) Euro/US$ exchange rate U.K., Ireland, Europe price (US$) Japan, NZ, Australia price (US$) Canada price (US$) Unit price for artist-sold units Distribution fee Marketing and promotion Print advertising Posters and photos E-card mailings Independent radio promoter Retail placement Total marketing & promo cost CD mail-out units Cost per mail-out unit per unit Postage and collateral per unit Total cost for CD mail-out
$11.45 $9.05 EUR 7.00 1.224 $8.57 $6.50 $7.00 $6.00 21%
$3,000 500 1,000 2,500 5,000 $12,000 2,000 $0.50 $2.00 $5,000
CASH FLOWS Own Years 0 Annual percentage sold in percent (totals 100%) U.S. forecasted units sold U.K., Ireland, Europe forecasted units sold Japan, New Zealand, Australia forecasted units sold Canada forecasted units sold Units sold by artist Total sales Cost of goods sold Mechanical royalties Recording-artist royalties Recoupables not recovered Promotion & marketing not recoupable Loss on inventory Upfront fee (advance) Taxable income Taxes(put rate in box) Net operating profit after tax Change in inventory Change in recoupables Free cash flow NPV IRR WORKING CAPITAL Own Years 0 Assets Inventory, incl. overage @... Recoupables Recoupables Production costs Marketing & promotion (1/2) Advance Total 30% $7,403 21,000 1 $5,254 12,663 2 $6,030 8,494 3 Assets $3,105 4,325 $7,430 $7,403 24,000 $5,254 13,938 $6,030 8,906 $3,105 3,875 $6,980 $15,000 6,000 3,000 $24,000 License Years 0 1 2 3 Own Per unit $0.90 $0.85 $1.45 0 0 0 0 0 $0 $0 $0 $0 $11,000 $0 ($11,000) $4,400 ($6,600) ($7,402) ($21,000) ($35,002) $23,828 53.9% 1 50% 4,000 1,000 500 250 750 $54,250 $5,850 $4,888 $8,338 $0 $0 $40,063 ($16,025) $24,038 $2,149 $8,338 $34,524 2 25% 2,000 500 250 125 375 $27,125 $2,925 $2,444 $4,169 $0 $0 $20,031 ($8,013) $12,019 ($776) $4,169 $15,411 3 25% 2,000 500 250 125 375 $27,125 $2,925 $2,444 $4,169 $4,325 $0 $3,105 $0 $12,601 ($5,041) $7,561 $2,925 $4,169 $22,085 License Per unit $0.90 $0.85 $1.75 License Years 0 0% 0 0 0 0 0 $0 $0 $0 $0 $11,000 $3,000 ($14,000) $5,600 ($8,400) ($7,403) ($24,000) ($39,803) $15,205 35.8% 1 50% 4,000 1,000 500 250 750 $54,250 $5,850 $4,888 $10,063 $0 $0 $33,450 ($13,380) $20,070 $2,149 $10,063 $32,281 2 25% 2,000 500 250 125 375 $27,125 $2,925 $2,444 $5,031 $0 $0 $16,725 ($6,690) $10,035 ($776) $5,031 $14,290 3 25% 2,000 500 250 125 375 $27,125 $2,925 $2,444 $5,031 $3,875 $0 $3,105 $0 $9,745 ($3,898) $5,847 $2,925 $5,031 $20,783
40%
$15,000 6,000 0 $21,000
Recoupables Production costs Marketing & promotion (1/2) Advance Total
WORST CASE
COMPASS RECORDSDiscounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit AssumptionsASSUMPTIONS Sales projections U.S. sales U.K., Ireland, Europe sales Japan, New Zealand, Australia sales Canada sales Units sold by artist Totalprojected sales (units) Weighted average cost of capital Units 2,000 2,000 1,000 500 1,500 7,000 12% Pricing U.S. wholesale unit price Less distribution fee U.K., Ireland, Europe price (euro) Euro/US$ exchange rate U.K., Ireland, Europe price (US$) Japan, NZ, Australia price (US$) Canada price (US$) Unit price for artist-sold units Distribution fee Marketing and promotion Print advertising Posters and photos E-card mailings Independent radio promoter Retail placement Total marketing & promo cost CD mail-out units Cost per mail-out unit per unit Postage and collateral per unit Total cost for CD mail-out
$11.45 $9.05 EUR 7.00 1.224 $8.57 $6.50 $7.00 $6.00 21%
$3,000 500 1,000 2,500 5,000 $12,000 2,000 $0.50 $2.00 $5,000
CASH FLOWS Own Years 0 Annual percentage sold in percent (totals 100%) U.S. forecasted units sold U.K., Ireland, Europe forecasted units sold Japan, New Zealand, Australia forecasted units sold Canada forecasted units sold Units sold by artist Total sales Cost of goods sold Mechanical royalties Recording-artist royalties Recoupables not recovered Promotion & marketing not recoupable Loss on inventory Upfront fee (advance) Taxable income Taxes(put rate in box) Net operating profit after tax Change in inventory Change in recoupables Free cash flow NPV IRR WORKING CAPITAL Own Years 0 Assets Inventory, incl. overage @... Recoupables Recoupables Production costs Marketing & promotion (1/2) Advance Total 30% $3,893 21,000 1 $2,689 17,013 2 $3,060 15,019 3 Assets $1,485 13,025 $14,510 $3,893 24,000 $2,689 19,188 $3,060 16,781 $1,485 14,375 $15,860 $15,000 6,000 3,000 $24,000 License Years 0 1 2 3 Own Per unit $0.90 $0.85 $1.45 0 0 0 0 0 $0 $0 $0 $0 $11,000 $0 ($11,000) $4,400 ($6,600) ($3,892) ($21,000) ($31,492) $852 13.6% 1 50% 1,000 1,000 500 250 750 $27,114 $3,150 $2,338 $3,988 $0 $0 $19,976 ($7,990) $11,986 $1,204 $3,988 $17,177 2 25% 500 500 250 125 375 $13,557 $1,575 $1,169 $1,994 $0 $0 $9,988 ($3,995) $5,993 ($371) $1,994 $7,615 3 25% 500 500 250 125 375 $13,557 $1,575 $1,169 $1,994 $13,025 $0 $1,485 $0 ($4,522) $1,809 ($2,713) $1,575 $1,994 $15,366 License Per unit $0.90 $0.85 $1.75 License Years 0 0% 0 0 0 0 0 $0 $0 $0 $0 $11,000 $3,000 ($14,000) $5,600 ($8,400) ($3,893) ($24,000) ($36,293) ($5,331) 3.1% 1 50% 1,000 1,000 500 250 750 $27,114 $3,150 $2,338 $4,813 $0 $0 $16,814 ($6,725) $10,088 $1,204 $4,813 $16,104 2 25% 500 500 250 125 375 $13,557 $1,575 $1,169 $2,406 $0 $0 $8,407 ($3,363) $5,044 ($371) $2,406 $7,079 3 25% 500 500 250 125 375 $13,557 $1,575 $1,169 $2,406 $14,375 $0 $1,485 $0 ($7,453) $2,981 ($4,472) $1,575 $2,406 $15,369
40%
$15,000 6,000 0 $21,000
Recoupables Production costs Marketing & promotion (1/2) Advance Total
WORST CASE
COMPASS RECORDSDiscounted Cash Flow Analysis for "License" and "Produce and Own" Alternatives Using Base-Case Unit AssumptionsASSUMPTIONS Sales projections U.S. sales U.K., Ireland, Europe sales Japan, New Zealand, Australia sales Canada sales Units sold by artist Totalprojected sales (units) Weighted average cost of capital Units 5,000 2,000 1,000 500 1,500 10,000 12% Pricing U.S. wholesale unit price Less distribution fee U.K., Ireland, Europe price (euro) Euro/US$ exchange rate U.K., Ireland, Europe price (US$) Japan, NZ, Australia price (US$) Canada price (US$) Unit price for artist-sold units Distribution fee Marketing and promotion Print advertising Posters and photos E-card mailings Independent radio promoter Retail placement Total marketing & promo cost CD mail-out units Cost per mail-out unit per unit Postage and collateral per unit Total cost for CD mail-out
$11.45 $9.05 EUR 7.00 1.224 $8.57 $6.50 $7.00 $6.00 21%
$3,000 500 1,000 2,500 5,000 $12,000 2,000 $0.50 $2.00 $5,000
CASH FLOWS Own Years 0 Annual percentage sold in percent (totals 100%) U.S. forecasted units sold U.K., Ireland, Europe forecasted units sold Japan, New Zealand, Australia forecasted units sold Canada forecasted units sold Units sold by artist Total sales Cost of goods sold Mechanical royalties Recording-artist royalties Recoupables not recovered Promotion & marketing not recoupable Loss on inventory Upfront fee (advance) Taxable income Taxes(put rate in box) Net operating profit after tax Change in inventory Change in recoupables Free cash flow NPV IRR WORKING CAPITAL Own Years 0 Assets Inventory, incl. overage @... Recoupables Recoupables Production costs Marketing & promotion (1/2) Advance Total 30% $5,648 26,000 1 $3,971 19,838 2 $4,545 16,756 3 Assets $2,295 13,675 $15,970 $5,648 29,000 $3,971 21,563 $4,545 17,844 $2,295 14,125 $16,420 $20,000 6,000 3,000 $29,000 License Years 0 1 2 3 Own Per unit $0.90 $0.85 $1.45 0 0 0 0 0 $0 $0 $0 $0 $11,000 $0 ($11,000) $4,400 ($6,600) ($5,647) ($26,000) ($38,247) $8,763 25.8% 1 50% 2,500 1,000 500 250 750 $40,682 $4,500 $3,613 $6,163 $0 $0 $30,019 ($12,008) $18,012 $1,676 $6,163 $25,850 2 25% 1,250 500 250 125 375 $20,341 $2,250 $1,806 $3,081 $0 $0 $15,010 ($6,004) $9,006 ($574) $3,081 $11,513 3 25% 1,250 500 250 125 375 $20,341 $2,250 $1,806 $3,081 $13,675 $0 $2,295 $0 ($960) $384 ($576) $2,250 $3,081 $20,725 License Per unit $0.90 $0.85 $1.75 License Years 0 0% 0 0 0 0 0 $0 $0 $0 $0 $11,000 $3,000 ($14,000) $5,600 ($8,400) ($5,648) ($29,000) ($43,048) $1,361 13.9% 1 50% 2,500 1,000 500 250 750 $40,682 $4,500 $3,613 $7,438 $0 $0 $25,132 ($10,053) $15,079 $1,676 $7,438 $24,193 2 25% 1,250 500 250 125 375 $20,341 $2,250 $1,806 $3,719 $0 $0 $12,566 ($5,026) $7,540 ($574) $3,719 $10,685 3 25% 1,250 500 250 125 375 $20,341 $2,250 $1,806 $3,719 $14,125 $0 $2,295 $0 ($3,854) $1,542 ($2,312) $2,250 $3,719 $20,076
40%
$20,000 6,000 0 $26,000
Recoupables Production costs Marketing & promotion (1/2) Advance Total
