Bravo Brands Inc (fka BRVO)

[starfire]

mcmike, that's a whole lot of Corporate Finance theory, normally taught in a year or so but I'll try!

Essentially the Value of a Firm is determined by discounting it's future cash flows using the concept called Time Value of Money ( u may want to Goog Time Value of Money) but here is a link.
http://www.investopedia.com/articles/03/082703.asp

Cost of Capital is the discount rate used in the above calculation. It is usually the weighted average after tax cost of debt and Equity. In this case I am assuming that there will be no debt in BRVO's capital structure and investors want a minimum return on equity of 15%. This is the most sensitive variable in the above calculation.

For Revenue forecast I used 2 scenarios:

1. start with 100M revenues in 2006 and grow to $1B in 2010 and
2. start with 300M revenues in 2006 and grow to $2B in 2010. There are various growth algorithms in Excel SS.

Then the cash flows (Net Operating Profit after Tax) are calculated using the numbers given in the investors kit.

Of course I am also assuming the effective tax rate as 35% and I have not leveraged any of the carry forward losses. But essentailly once the model is captured one can tweak the numbers and calculate the discounted earnings per share

For P/E multiple I use 4 because that is the Industry average (given in Yahoo finance)

Anyways there are some underlying assumptions in financial theory:
1. A business operates in infinity. That's why one has to consider growth beyond 2010
2. Investors are rational people

mcmike, here is a good book,
Intermediate Financial Management by
Eugene Brigham and Phillip Daves