Reference no: EM132444289

Aereo's financial model projects Gross Profit margins of about 55%. To support aggressive expansion plans, Aereo has budgeted marketing and advertising expenditures first in NY and then in other East Coast markets of $23M in 2013 and $35M in 2014.  The company projects operating CF BE by 2015 with annual NP expected to average 25%, beginning in Year 3.  The company projects operating losses of 25% of Sales in 2013 and 10% of Sales in 2014.

Investments in Fixed Assets will be required in each new market.  The company projects it will generate $ 4 in Sales for every $1 invested in assets for Sales up to $200M; and $6 for Sales higher than that.

Aereo estimates that Series C investors will accept a 40% annualized return partly because many observers see a potential merger, acquisition or sale in the next 18-24 months.

The online TV/Cable market is already huge and growing.  The potential market for streamed live TV service is UNKNOWN pending the final outcome of the NY litigation, but some analysts believe it could be as large as $ 80-100Billion in the near term.  2013 will be Aereo's first year of operation.  Its revenue projects for the next 4 years, based on expansion into 20 East Coast markets are:

Year                             2013               2014                  2015                2016

Revenues ($M)           $25.2               $60.2               $360.2             $625.8

A. Calculate Aereo's year to year annual Sales growth rate and estimate the compound annualized growth rate for 2013-2016.