01-12-1987 Council Packet - Laserfiche WebLink

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Page Four on Schedule A, it is calculated that based upon the partners' equity contribution a favorable rate of return i- expected. III. MARKET VALUE OF SYSTEMS In calculating the market value of a cable system the factor most often used by investors in the cable industry is a multiple of cash flow. As disclosed in the offering documents, the purchase price for the DCI systems approximates $45,000,000. In comparing the operating cash flow before management and investment banking fees forecasted in 1987 per the Forecasted Statement VI in Exhibit 1 ($4,578,000) it is calculated that the purchase price approximates 10 times 1987 operating cash flow. This factor is consistent with the market value of cable systems in the cable inaustry. In assessing the market value of the systems from 1987 through 1994 the Commission can assume that the value will always approximate 10 times each year's forecasted operating cash flow before management fees and investment banking fees. The market value of the systems being acquired by Dowden Partners approximate $45,000,000 currently increasing to a forecast value of approximately $115,000,000 in 1994. IV. CONCLUSION The Commission is reminded chat the basis for reviewing the financial condition of Dowden Partners' compared with the current condition of DCI is based solely on the offering document which the Commission has received. Most specifically, Exhibits 1, 5 and 6 were reviewed. This analysis in no shape or form represents a review of the legal or technical qualifications of Dowden Partners. Additionally, this analysis does not address the tax implications facing Dowden Partners as a result of this transaction and the recently passed Tax Reform Act of 1986. Based upon the financial analysis of the pro forma balance sheet of Dowden Partners compared to Lhe balance sheet of FICI, the forecasted operating results and potentia:. rate of return on equity investment, and the market value of the systems being acquired by Dowden Partners, it appears that the financial condition projected for Dowden Partners subsequent to the transaction and in future years is at last equivalent to that of DCI.