Sunday, September 07, 2008

So you want to lease a lottery....

Well I dusted off the spreadsheet I did when this first came up and I have made it available here...

Again I am not a finance professional and it's been a while since I had finance in grad school so I may be off on some of my numbers or calculations...

Turns out my estimate for FY 2007 earnings were only off by 9 million on sales of over two billion (not bad if I say so myself), for the annouced 2008 earnings I am off by 50 million, the had a 2.8% revenue growth I estimated 3%. If you want the spreadsheet, or collaborate on it with via Google spreadsheets, send me an e-mail, I will also be willing to send you the actual spreadsheet if you send an e-mail the highlights however.

Using a annual growth rate of 5% and a 3% inflation rate, the NPV value (how much you would pay today to get the cash flows over time) is between 24 and 25 billion dollars (depending on which net present value formula you use) for about a 25 year lease.

It does bring up some interesting numbers near the end however, by 2033 lottery revenues show 7.5 Billion dollars, assuming that Illinois has about 13 million people today that if population remains flat, every man, woman and child in Illinois would be spending abut $577 a year in lottery tickets.

So 25 Billion, that is the max (using the numbers I have and set) that you would expect anyone to pay for the lottery lease

The posts from 2006 are here and here.

Again there are a ton of risks to anyone who leases this thing. So I doubt you get anything near 24 billion, also the contract is going to have some conditions including....

for a list of some of those risks go to my post here...


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