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
not all of these points are new so apologizing in advance for duplicative stuff
CCE's purchase of 81 mil shares of treasury was specifically set up because they knew they had options for 69 mill shares from the institutional investors which would bring them to just over 150 million.
The 81 mill. will come from treasury and bring the fully diluted to 300 million. There may be some shares authorized but not issued due to employee options, unconverts, and unexercized wts.
Obviously a successful master distribution agreement must be reached. This has not been concluded.
A BOT member wanted to know how the "nutrition conference" went. It was, in fact, a meeting with school nutritionists, not a nutrition conference and Roy said, "No comment"
A BOT member from Seattle wanted to know why he's seen no Slammers. Have you checked Walgren's?
[btw, check your Walgren's ad next Sunday] This did not come from my phone call with Roy yesterday, but from an earlier communication.
CCE's filing purporting to show O/S was not factual. Was derived from 69mil shares & 52.2% ownership and Roy did not have any input into CCE's figures and doesn't know where they came from.
Roy said you CANNOT extrapolate shares O/S from the filing like the SB2/A. I previously posted that the 55 mill registered from that filing would mean 151 mill O/S if they represented 36.7% of the O/S. Roy thought that somewhere in the neighborhood of 25-30 million including warrants was coming out from the financings going back to June '04.
Roy confirmed that if CCE was going to assume the warrants from institutional holders, they WOULD be responsible for ponying up the exercise price to the company. the statement by the So. Fla. biz journal IS INACCURATE re. the company receiving no funds from the filing.
He reiterated CCE's statement from their conf call that CCE wanted an equity ownership in the BRVO brand and that the master distribution agreement (for the U.S. & Europe) belongs to BRVO unlike CCE's relationship with "RockStar"(energy drink?) where CCE is a subdistributor under a master distribution agreement. (http://ir.cokecce.com 55' into the call)
BRVO will announce a webcast for their 2nd qtr. ending June 30 soon, and hopes to have more clarification of the CCE "situation" by that time.
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