Obscure Valuation Question
Hi all, just a quick, somewhat obscure valuation question that I was asked in an interview:
"Consider this scenario--
A songwriter is paid a $2mm advance from music publishing company to acquire 25% of the writer's songwriting income for 10 years. The songwriter retains 75% ownership. The publisher's initial $2mm cash outflow is an "advance", so the songwriter does not receive any income until that advance is recouped (i.e. no income until $2mm/.75= $2.66mm is recouped).
The question is: how do we perform a valuation of the songwriter's income? In other words, how do we arrive at the $2mm advance number? Walk me through it."
Any help would be much appreciated
Also, the interviewer wanted me to approach it as a DCF, no multiples, comps, etc.
Search Bowie Bonds.
Just discount the future cash flows from songs back using some cost of equity. You could get pretty creative with the valuation.
Explicabo nisi quam sunt laudantium omnis est. Ut incidunt distinctio perspiciatis. Molestiae aut incidunt adipisci nemo sint iure. Saepe id provident cupiditate blanditiis.
Dolor placeat facere eaque et vel. Ipsa enim nihil laudantium in ea. Tempora dolor illo aut.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...