TNAG-1555-FCO40-2119-Broadcasting-in-Hong-Kong-1986 — Page 321

YEAR

3

6

8

18

12

13

14

15

16

17

18

19

20

45%%%

678.83 745.83 828.41 982.46 123.28—135.61- -149.17----164.88— 188,49-

--% of marketing share-

1

28%

30%- 48%

Advertising Incone

Sundry-Income-

78.29 154.64 -14.86-38.93-

255.15 374.22 463.18 51.8374,84- -92.62-

589.41 568.35 -181.88 112.87-

616.39

Total Revenue.

84.35 - 185.57 306.18—449.87— 555.72—611.29-672,42---737,67-

Less-

Operating Cost

248.80

254.48

296.63 345.87 483.29 448.86 475.79

Royalty-

: Taxation

Total Costs

813.63 195.88-

-454-

45%

45%-

45%

992.70 1,891.97 1,281.17 1,321.28 1,453.41 1,598.75 1,758.63 1,934.49 198.54--218,39248.23-264.26 298.68- -319.75 -351.73-386.98-

964.50–1,882,951,191.24-1,318,36--1,441,48-1,585,54–1,744,181,918.51–2,118.36–2,321+39-

584.34 534.68 566.67 698.67 636.71 674.91 715.41 758.33 883.83 852.96 983.19 957.38 1,814.82 1,875.71

33.86 -51.2761.74 -73.58- 86.95 182.81 118.96-138.91—159.39-183.37—218.23 243.28273.88-311.42- 18.79 29.45 34.27 49.84 48.26 56.61 66.82 76.59 88.46 181.77 116.68 133.36 152.01 172.84

254.48 296.53 345.37 403.29 448.86 475.79 556.99 614.32 662.68 715.89 771.91 833.54 988.39 972.94 1,851.69 1,137.28 1,238.89 1,331.82 1,448.71 1,559.97

-178.85 -11.86 -39.69 45.78 186.87 135.51 115.44 125.35 158.96 179.91 212.58 249.41 298.85 337.43 389.71 449.34 514.39 557.49 667.64 761.42

Present Value 7 154

Discount factor Discounted-value

Accumulated disct value

.8695652 .7561437 .6575162.5717532 .4971767 .4323276 .3759378 .3269818 .2842624 .2471847 .2147432.1669872.1625289 1413287.1228945.1869348 .94929259.8688851 .8782653,8611893 -147.87 -83.98 -26.18--- -26.18- 53.13 -58.58 -43,48- -48,98——————-42,91 44.47 45.69 -46.62- -47.27 47,69 — 47.8947,93 47.76———47,42—47.85 46,52 -147.87 -231.85 -257.95 -231.77 -178.64 -128.86 -76.66 -35.68 7.23 51.78 97.39 144.81 191.28 238.97 286.86 334.77 382.54 438.81 477.86 523.58

-Present-Value-3-25%

Discount factor

Discounted value

Accumulated disct value

.8

.64 .512 .4896

.32768 .262144 .2897152 .1677722 .1342177 .18737428958993 8687195,.8549256;8439985 0351844 8281475 .8225188 .8138144, 144118 8115292 -136.84 ~71.88-28.32- -18,75- 35.82-35.5224.21 21.83 28.26-19.32 13.26- 17.14. 15.9914.84- 13.71 -12,62----11,57 18.58 9.65 9.78 -136.84 -287.12 -227.44 -298.69 -173.67 -138.15 -113.94 -92.91 -72.65 -53.33

-1.94 12.98 26.61 39.23 58.88 61.39

-35.87-17.93

71.84

79.81

¡Conclusions

In Model 2, with an initial investment of $488 million, Company X is expected to recoup its investment and earn a rate of return of 15% by year 18. It is however not expected to obtain a 25% -ra}: -ot-return within the twenty-years-period.

-Assumptions:

1. Advertising income of the whole television industry is assumed to increase by 18%`pia.

—2—Advertising-income-of-Company-X-is-assumed-to-be-a-givan-percentage-pé-the-market-share-of-the-whole-television-industry-as-denoted-in-the-two-models,

3. Sundry income of Company X is assumed to be 28% of the company's advertising income.

A

4. Operating costs of Company X-are assumed to increase by an-inflation rate of 6% ...--Growth rates for Mode 1-are- 28% par for year 2-6-15% pa for-year-3;-and-for Model-2 at 18%-

for years 2 - 4 and 5% for year 5.

5. Royalty of Company X is calculated at 25% of the excess of revenue over operating costs. Royalty liability is assumed to be due in years when accumulated losses of previous years have been fully offset. 6. Taxation of Company A is calculated at 18.5% of profit net of royalty. Tax liability is assumed to be que in years when accumulate losses of previous years have been fully offset. 7. Cashflows-for-both models are discounted to present day values-at-the assumed-rate-of-15%-and-25% respectivaly. -