Moelis & Company Investment Banking Pitch Book
Weighted Average Cost of Capital Analysis (cont'd)
ILLUSTRATIVE COST OF CAPITAL CALCULATION
Long-Term Risk Free Rate ¹
Market Risk Premium 2
Size Premium ³
Tax Rate
Cost of Debt
2.66%
6.21%
1.
2
2.42%
3.
4.
5.
36.7%
51%
WACC SENSITIVITY
Debt/
Total Cap
Source: Bloomberg, Company filings, US Department of the Treasury, 2015 Duff & Phelps Valuation Handbook
Notes:
Market data as of 11/04/15
5.0%
10.0%
US. Department of the Treasury, 20-Year Treasury
Supply-side long horizon expected equity risk premium per 2015 Duff & Phelps Valuation Handbook
Average of CRSP deciles 8 and 9 per 2015 Duff & Phelps Valuation Handbook
Rhombus federal statutory rate plus state tax rate, net of federal benefits per latest 10-K
Median of Media / Technology Licensing peer group
1.000
11.3%
11.1%
10.9%
1.100
STRICTLY CONFIDENTIAL
Unlevered Beta
11.9%
11.7%
11.5%
MOELIS & COMPANY
▪ Beta reference range of 1.0 to 1.4
Rhombus 2-year and 5-year asset beta of 0.780 and 1.594, respectively
Moelis derived its reference range based on a narrowed beta range for Rhombus
Moelis also observed the 2- and 5-year asset beta of its comparable companies
Moelis observed that although IMAX's relevance to the selected publicly traded companies analysis is limited (see page 22),
IMAX is relevant to the discounted cash flow analysis because IMAX's market exposure is similar to Rhombus' and is
consistent with Rhombus' 2- and 5-year asset beta levels
▪ 5-year beta more relevant data set for following reasons:
Rhombus contract renewal cycle takes place over five-plus year time period
Premium priced film tickets are highly sensitive to broader economic cycles, therefore it is useful to incorporate longer time
periods
1.200
12.5%
12.3%
12.1%
1.300
13.2%
12.9%
127%
- Rhombus' exposure to film slate makes the Company highly dependent on intermittent films that perform exceptionally
well in 3D (e.g., Avatar and Gravity), therefore it is useful to incorporate longer time periods
1.400
13,8%
13,5%
13.3%
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