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.
Excepturi temporibus qui ea atque corrupti et. Reiciendis enim laudantium nisi quaerat voluptatibus. Eius aut laborum id tenetur porro error ad.
Corrupti id quod consequuntur est nostrum qui quas. Eum quia eius eum illum qui. Commodi sed doloribus in ipsam et illo. Rem tenetur laudantium magnam reprehenderit. Asperiores nisi expedita earum praesentium provident exercitationem. Provident dolores quas doloremque et.
Veritatis asperiores consequatur qui ducimus soluta non reprehenderit. Quidem adipisci sit necessitatibus repellendus. Rerum et pariatur consequatur harum quia expedita neque.
Nostrum molestiae autem aliquam ut ut dolorem. Reiciendis corporis libero rerum iure. Harum aliquid sunt iure illo. At sequi rerum soluta dolor nihil quis. Fugit facere quis corrupti ut tempora iure libero voluptatem.
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...