Nek Johns has just returned from a presentation by Rossi Brands (Rossi), a multi-national alcoholic drinks and spirits producer. Rossi were presenting their plans for a new range of premium pre-mixed spirits products. Nek reviews the notes she took during the presentation. Market value estimated $50,000m worldwide No. of customers in target age range - 42m in core countries Market research costs incurred to establish viability - $50m Advertising - launch spend required of $100m New product after-tax free cash margin of 10%; 2% higher than existing products Alterations to bottling facilities - $100m to be depreciated using a 150% declining balance rate Sales of new product - 3% of market value Project expected to be cash generative very early into 7 year expected life Financed from existing business; no new capital required Likely loss of sales of existing brands - 1% of market value. Nek believes the cash flows should be discounted at a rate of 8%. What should be the change to Rossi’s market capitalization given the above new information? Answer A) $322.7m B) $372.7m C) $581m D) $630m
it took me 90 secs to read and understand without doing any calculation…
Cfaiok, I think people should score 90% with this type of questions…I mean I don’t even count the question for dummies… Anyway… it took me way more that 90 secs… Hint: The correct answer is B. Where are all people who were scoring 90 and 100%??? 