Radio One Case Study Essay

1583 Words7 Pages
Part 1: In 2000, Radio One, Inc. sees strategic opportunity in the opportunity to grow through acquisition, following a Clear Channel divestiture mandated by the FCC. The divestiture poses the opportunity to Radio One to acquire twelve (12) urban stations that are in the top 50 African American markets in the U.S. Even though the company saw tremendous growth through acquisition over the prior decade, this unique situation has the potential to generate significant shareholder value and further increase market dominance. If they choose to acquire these 12 channels, along with 9 other stations in a separate acquisition, it would double the size of Radio One and give it a national presence in the largest African American markets.…show more content…
8,092 | + Depreciation | 17,073 | 17,073 | 17,073 | 17,073 | = FCF | 33,216 | 37,304 | 42,334 | 47,771 | Part 2: Estimate of New Markets Net Income | | 2001 | 2002 | 2003 | 2004 | Broadcast Cash Flows (BCF) | 136,034 | 158,249 | 180,786 | 205,920 | - Corporate Expenses | 6,900 | 7,935 | 9,125 | 10,494 | - Depreciation | 107,500 | 107,500 | 107,500 | 107,500 | = EBIT | 21,634 | 42,814 | 64,161 | 87,926 | - Taxes (35%) | 7,572 | 14,985 | 22,456 | 30,774 | = Net Income | 14,062 | 27,829 | 41,705 | 57,152 | | | | | | Estimate of NWC and Change of NWC | | 2001 | 2002 | 2003 | 2004 | Current Assets | | | | | - Current Liabilities | | | | | = Net Working Capital (NWC) | 32,078 | 36,115 | 39,996 | 43,955 | | | | | | NWC as a percentage of revenues | 25% | 25% | 25% | 25% | | | | | | | 2001 | 2002 | 2003 | 2004 | Net Revenues | 128,313 | 144,460 | 159,985 | 175,820 | Change in Net Working Capital | 3,543 | 4,037 | 3,881 | 3,959 | | | | | | Capital Expenditures | | 2001 | 2002 | 2003 | 2004 | CAPEX for existing business | 4,683 | 5,619 | 6,743 | 8,092 |
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