NASDAQ OMX Group (NDAQ)

Estimated fair values of licenses related to technology and the Nasdaq brand name

Technology licenses

Nasdaq used the relief from royalty method in valuing DIFX’s right to future OMX/Nasdaq technology. We researched publicly available license agreements for companies comparable to OMX/Nasdaq that were licensing similar technology. These license agreements yielded an average royalty rate of 5.0% for comparable licensing agreements. We applied the selected royalty rate to DIFX’s projected revenue stream, based on management’s estimates. The tax rate in Dubai is zero. The resulting cash flows were discounted using a rate of 19.0%. The discount rate was developed using the comparable public company data and economic data reflecting the risk environment in DIFX’s market area. The discount rate is based on the capital asset pricing model and represents the weighted average cost of capital.

Trade name

The Nasdaq trade name was valued using an excess earnings model. The trade name revenue stream includes the incremental revenue streams that DIFX will generate as a result of Nasdaq entering into an arrangement with DIFX. The margins for the trade names were the same as those for the overall business.

A contributory asset charge for the use of other assets (i.e., working capital, fixed assets, the technology, and assembled work force) was deducted from the after-tax operating income yielding the excess earnings generated by the trade name, which were discounted at a rate of 19.0%.