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Valuation - NPV

Question 1
Silver Lake Partners is well-known for its other investments. For example, on January 3, 2011 Silver Lake Partners invested (together with other entities) $946 million in Series G preferred shares of Groupon priced at $31.59 per share. According to the Groupon prospectus, on October 31, 2011 each share of Series G preferred stock was converted into four shares of Class A common stock. On November 9, 2011 Silver Lake Partners sold some of these shares at the IPO price. What was Silver Lake Partners annualized return on this investment? You may assume investment date to be exactly 10 months earlier, or use the XIRR function. What is Silver Lake Partners annualized return for remaining shares if it sells them on April 9, 2013? Groupon did not pay any dividends since IPO.
See attached excel template

Question 2
Silver Lake Partners is located in Menlo Park, California. The following information is for pedagogical purposes only and unlike earlier questions does not deal with real situation. There are rumors that if Silver Lake Partners acquires Dell Inc., it will move its headquarters to Menlo Park. Recently Silver Lake Partners has entered into a Lease Agreement (the "Lease") with Sequoia LLC (the "Landlord") to lease office buildings (the "Premises"). Because the Premises are not yet under construction, Dell Inc. will not be obligated to pay rent until three months after the Landlord makes the Premises available to Dell Inc. (the "Delivery Date"). The Delivery Date is estimated to be July 2014, and Dell Inc. anticipates that the Lease term and its rental obligations will initiate in October 2014. The 12-year Lease will expire in September 2026. Under the Lease, rent will be paid on a monthly basis at $1.8 million per month. The Landlord is negotiating with several contractors to build the property. Contractor 1 bids $60 million and can start work immediately to finish it by July 2014. Contractor 2 cannot bid right now, because of another ongoing project. In three months Contractor 2 will know for sure whether it can bid or not. If it bids, the bid will be $ 40 million. However, if Contractor 2 does not bid, the Landlord will have to hire Contractor 1, thus losing 3 months (the rent payments will start in January 2015, but the lease will still expire in September 2026). There is a 60% risk-adjusted probability that Contractor 2 will formally bid. The annual risk-free rate is 2.4%. What is the value of option to delay? What should the Landlord do?
See attached excel templet


Solution Preview

See the attached file. Thanks
Contractor 2 savings NPV 3
3 months ...

Solution Summary

The valuations of NPV are determined. The remaining shares if it sells them for Groupon is determined.