978-0073526898 Case NFLX 10 Part 3

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Model Summary Sensitivity Analysis

Historical Data For: Forecast Horizon 10 Years

NETFLIX INC

Most Recent Fiscal Year End: 12/31/2004

This Year’s ROE (%) 10.21%

Average ROE (last five years) 977.87%

Sales Growth (last five years) #DIV/0!

Terminal Year’s ROE (%) 16.80%

Forecast Data: This Year’s Sales Growth (%) 36.40%

Forecast Horizon 5 Years

This Year’s ROE 10.21%

Terminal Year’s Sales Growth (%) 5.00%

Terminal Year’s ROE 16.80%

Cost of Equity Capital (%) 10.00%

Terminal Year’s Sales Growth 5.00%

This Year’s Forecast EPS $0.34

Estimated Price/Share $18.96

Cost of Equity Capital 10.00% assumptions on the estimated price per share. Note that the sensitivity

Valuation Date 3/1/2005 analysis uses a linear smoothing algorithm to compute ROE and Sales

Estimated Price/Share

$15.99 Growth between the current year and the terminal year, so it may

Estimated Price/Earnings Ratio 46.57 provide a different price estimate from your detailed analysis even

Estimated Market/Book Ratio 5.39 with the same key forecasting assumptions.

Quick ‘n’ Dirty Computations

5 Years 1 2 3 4 5 6 7 8 9

ROE 10.21% 11.53% 12.84% 14.16% 15.48% 16.80% 16.80% 16.80% 16.80%

Growth 36.40% 30.12% 23.84% 17.56% 11.28% 5.00% 5.00% 5.00% 5.00%

Lagged BV 156283 213170 277377 343503 403823 449374 471843 495435 520206

Earnings 18860 28273 39876 52920 66038 77372 81241 85303 89568

Residual Income 3231 6956 12138 18570 25656 32435 34057 35759 37547

PV Residual Income 2938 5749 9119 12683 15930 18309 17476 16682 15924

PV Term. Residual Income 200460

PV 20Y Residual Income 248749

PV Residual Income 449209

Equity Value 605492

Equity Value at Current Date 646540

Less Contingent Claims 0

Adjusted Value 646540

Price/Share 12.26085294

10 Years 1 2 3 4 5 6 7 8 9

ROE 10.21% 10.87% 11.53% 12.19% 12.84% 13.50% 14.16% 14.82% 15.48%

Growth 36.40% 33.26% 30.12% 26.98% 23.84% 20.70% 17.56% 14.42% 11.28%

Lagged BV 156283 213170 284070 369632 469359 581254 701574 824770 943702

PV Residual Income 780228

Equity Value 936511

Equity Value at Current Date 999999

Less Contingent Claims 0

Adjusted Value 999999

Shares Out. 52,732

Growth 36.40% 34.83% 33.26% 31.69% 30.12% 28.55% 26.98% 25.41% 23.84%

Lagged BV 156283 213170 287417 383012 504389 656310 843687 1071314 1343535

Earnings 18860 26378 36432 49685 66898 88924 116681 151114 193146

Residual Income 3231 5061 7691 11383 16459 23293 32312 43983 58793

PV Residual Income 2938 4183 5778 7775 10220 13148 16581 20518 24934

PV Term. Residual Income 1554915

PV 20Y Residual Income 698439

Equity Value 2409637

Equity Value at Current Date 2572991

Less Contingent Claims 0

Adjusted Value 2572991

Shares Out. 52,732

Price/Share 48.79370399

10 11 12 13 14 15 16 17 18 19 20 21 22

16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80%

5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%

546217 573528 602204 632314 663930 697126 731983 768582 807011 847361 889729 934216 980927

94046 98749 103686 108870 114314 120030 126031 132333 138949 145897 153192 160851 168894

39425 41396 43466 45639 47921 50317 52833 55475 58248 61161 64219 67430 70801

15200 14509 13850 13220 12619 12046 11498 10975 10476 10000 9546 9112 8698

10 11 12 13 14 15 16 17 18 19 20 21 22

16.14% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80% 16.80%

8.14% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%

1050152 1135634 1192416 1252037 1314639 1380371 1449389 1521859 1597952 1677849 1761742 1849829 1942320

176382 195531 205308 215573 226352 237669 249553 262030 275132 288888 303333 318500 334425

71367 81968 86066 90369 94888 99632 104614 109844 115337 121104 127159 133517 140193

27515 28729 27423 26177 24987 23851 22767 21732 20744 19801 18901 18042 17222

10 11 12 13 14 15 16 17 18 19 20 21 22

13.17% 13.50% 13.83% 14.16% 14.49% 14.82% 15.15% 15.48% 15.81% 16.14% 16.47% 16.80% 16.80%

22.27% 20.70% 19.13% 17.56% 15.99% 14.42% 12.85% 11.28% 9.71% 8.14% 6.57% 5.00% 5.00%

1663833 2034369 2455483 2925217 3438886 3988763 4563943 5150410 5731376 6287893 6799727 7246469 7608792

243606 303148 372159 450659 538205 633813 735899 842260 950099 1056106 1156594 1247682 1310066

77222 99711 126610 158137 194316 234937 279505 327219 376961 427317 476621 523035 549186

29773 34948 40342 45807 51170 56242 60828 64739 67800 69870 70847 70678 67465