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Netflix and Blockbuster Financial Data

Visit the Netflix and Blockbuster Financial Data handout to weigh the benefits of an investment with each company. Consider a scenario where you have $10 million to invest and are considering investing in Netflix or Blockbuster equity (or both). In the context of this investment scenario address the following questions:

Develop estimates of the fair market values of Netflix and Blockbuster.
What are the net present and present values of an investment in each?
Based on the payback method, which is the better investment, Netflix or Blockbuster?

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Fair market value

The fair market value for the two companies has been estimated at $ 2.5 billion dollars for Netflix and $ 200 million for Blockbuster. Blockbuster has low fair market value because the company has incurred high levels of debt compared to total operating assets. In the financial year 2010 Blockbuster had total assets amounting to $ 1,183.50 million and total liabilities valued at $ 1,735.50 million (Google finance, 2011).

Net Present Value

Net present ...

Solution Summary

This solution provides a detailed, step by step calculation of the given finance problem.