Corporate Finance: Instructor\'s Manual Applied Corporate Finance

(Amelia) #1
Aswath Damodaran 146

Disney’s business breakdown


Business

Comparable
firms

Number
of firms

Average
levered
beta

Median
D/E

Unlevered
beta

Cash/Firm
Value

Unlevered
beta
corrected
for cash

Media
Networks

Radia and TV
broadcasting
companies 24 1. 22 20. 45 % 1. 0768 0. 75 % 1. 0850

Parks and
Resorts

Theme park &
Entertainment
firms 9 1. 58 120. 76 % 0. 8853 2. 77 % 0. 9105
Studio
Entertainment

Movie
companies 11 1. 16 27. 96 % 0. 9824 14. 08 % 1. 1435

Consumer
Products

Toy and
apparel
retailers;
Entertainment
software 77 1. 06 9. 18 % 0. 9981 12. 08 % 1. 1353

Diosney has other businesses (like cruise lines) which are not broken out


separately because they are too small... There is also a trade off to breaking


businesses down too much into subsectors, since it becomes more difficult


to find comparable firms.


Estimating details:


1. Comparable firms: get 75% or more of their revenues from the stated


business


2. Average levered beta: Simple average of two-year weekly return betas for


comparable firms.


3. Cash / Firm value: Cash holdings as a percent of firm value at comparable


firms


4. Unlevered beta corrected for cash: Unlevered beta/ (1 - Cash/ Firm Value).


We are assuming that cash has a beta of zero.

Free download pdf