Exhibit 1 Summary Financial Information on Sampa Video, Inc.

, 2000 (in thousands of dollars)

Sales
a
EBITDA
Depreciation
Operating Profit
Net Income

FY 2000
22,500
2,500
1,100
1,400
660

Source: Casewriter estimates.

a

EBITDA is the Earnings Before Interest, Taxes, Depreciation and Amortization.

No. Of Stores
Increase in Annual Growth Revenue
Free Cash Flow Growth
Upfront Investment Required

30
10% Over 5yrs
5%
1.5 million

Exhibit 2 Projections of Incremental Expected Sales and Cash Flows for Home Delivery
Project 2002-2006 (in thousands of dollars).

Sales
EBITDa
Depreciation
EBIT
Tax Expense
a
EBIAT
CAPXb
Investment in Working Capital

2002E
1,200

2003E
2,400

2004E
3,900

2005E
5,600

2006E
7,500

180
(200)
(20)
8
(12)

360
(225)
135
(54)
81

585
(250)
335
(134)
201

840
(275)
565
(226)
339

1,125
(300)
825
(330)
495

300
0

300
0

300
0

300
0

300
0

Source: Casewriter estimates.

a

EBITD is the Earnings Before Interest, Taxes and Depreciation. EBIAT is the Earnings Before Interest and After
Taxes. Taxes calculated assuming no interest expense.
b

Annual capital expenditures of $300,000 were in addition to the initial $1.5 million outlay, and are assumed to
remain constant in perpetuity.

Exhibit 3 Additonal Assumptions.

Risk-free Rate (Rf)
Project Cost of Debt (Rd)

5.0%
6.8%

Market Risk Premium

Marginal Corporate Tax Rate
Project Debt Beta (d)

7.2%
40%
0.25

Asset Beta for Kramer.com and Cityretrieve.com

Source: Casewriter estimates.

1.50

Value of the Project f

Asset Beta
Cash Flow Growth rate
Risk Free Rate of Return
Market Risk Premium
Cost Of Equity
Initial Investment
Cost Of Debt
Project Debt Beta (d)

1.5
5%
5%
7.20%
15.80%
1500
6.80%
0.25

Exhibit 2
Years
Initial Investment
Sales
EBITDa
Depreciation
EBIT
Tax Expense
EBIATa

2
2003E

3
2004E

4
2005E

1,200
180
(200)
(20)
8
(12)

2,400
360
(225)
135
(54)
81

3,900
585
(250)
335
(134)
201

5,600
840
(275)
565
(226)
339

300
0

300
0

300
0

300
0

(112)
0.86
-96.72

6
0.75
4.47

151
0.64
97.24

314
0.56
174.62

(1500)

CAPXb
Investment in Working
Capital
Free Cash Flow
Discount Factor
Present Value

1
2002E

1.00
-1500

14.49% DF @ 14.49%
PV

0.873439 0.762895 0.666342 0.5820091

-97.8251 4.577371 100.6177 182.750859
3225.89
1725.89

Total Present Value

NPV

2728.49
1228.49

Value of the Project

1228.49

of the Project for Entirely Equity based Firm

Target D/E
Target D/V
New Equity Beta
New Equity Return

5
2006E

0.33
0.25
1.80
17.94%

5
Terminal Value

7,500
1,125
(300)
825
(330)
495
300
0

495
0.48
237.72

4812.50
0.48
2311.15

0.508349292
251.6328996

0.508349292
2784.136402

ADJUSTED PRESENT VALUE

Asset Beta
Cash Flow Growth rate
Risk Free Rate of Return
Market Risk Premium
Cost Of Equity
Initial Investment
Cost of Debt
Project Debt Beta (d)
Additional Debt

Debt
Cost of Debt
Interest Paid
Tax
Tax Benefit
Debt Tax Shield
Present Value of Firm

1.5
5%
5%
7.20%
15.80%
1500
6.80%
0.25
750

750
6.80%
51
40%
20.40
300
1528.49

20.4
20.4
300

RESENT VALUE (APV) APPROACH

WACC - 25% DEBT/VA

Growth rate
Tax Rate
Asset Beta
Debt Beta
Cost Of Debt*
Risk Free Rate (Rf)
Risk Premium
Debt
Equity
Equity Beta
Cost Of Equity
WACC

5%
40%
1.5
0.25
6.80%
5%
7.20%
25%
75%
1.92
18.80%
15.12%

5%
40%
1.5
0.25
6.80%
5%
7.20%
50%
50%
1.83
18.20%
11.14%

Years

Initial Investment
Sales
EBITDa
Depreciation
EBIT
Tax Expense
EBIATa

5%
40%
1.5
0.25
6.80%
5%
7.20%
75%
25%
1.75
17.60%
7.46%

1
2002E

2
2003E

1,200
180
(200)
(20)
8
(12)

2,400
360
(225)
135
(54)
81

300
0

300
0

(1500)

CAPXb
Investment in Working
Capital

(112)

Free Cash Flow

Discounting Factor WACC = 15.12%)

Present Value

1.000
-1500.00

0.869
-97.290

0.755
4.53

Discounting Factor WACC = 9.10%)

Present Value

1.000
-1500.00

0.900
-100.77

0.810
4.86

Discounting Factor (WACC = 4.40%)

Present Value

1.000
-1500.00

0.931
-104.225

0.866
5.20

25% Debt
NPV Case - 1
NPV Case - 2
NPV Case - 3

50% Debt
1469.97
3116.52
2040.53
4003.79
2687.67
5010.91

75% Debt
9379.56
11471.49
13847.90

*Note: It is Assumed that Cost of Debt Remains Same.

C - 25% DEBT/VALUE RATIO IN PERPETUITY

3
2004E

4
2005E

5
2006E

3,900
585
(250)
335
(134)
201

5,600
840
(275)
565
(226)
339

7,500
1,125
(300)
825
(330)
495

300
0

300
0

300
0

151

314

495

5
Terminal Value
(25% Debt)

5135.87

5
Terminal Value
(50% Debt)

8464.98

5
Terminal Value
(75% Debt)

21128.05

0.655
98.97

0.569
178.78

0.495
244.82

0.495
2540.15

0.495
4186.70

0.495
10449.74

0.728
109.99

0.655
205.80

0.590
291.91

0.590
3028.74

0.590
4992.00

0.590
12459.70

0.806
121.68

0.750
235.47

0.698
345.44

0.698
3584.10

0.698
5907.34

0.698
14744.34