EM and Presentation Guidance Questions
BW/IP
1. Was Borg-Warner’s Industrial Products Group a good candidate for a leveraged buyout in 1987? Evaluate the price paid and the structure of the deal that closed in May 1987. Are you optimistic about BW/IP’s prospects?
2. Do you favor the proposed acquisition of UCP? What are the primary sources of value in such a transaction? Is the proposed price reasonable?
3. How do the various features of the BW/IP buyout affect the company’s decisions about long-horizon opportunities such as the UCP acquisition?
4. What are the advantages and disadvantages of the 1987 buyout, viewed as a financial program?
5. As one of BW/IP’s bankers, would you approve of the company’s request for a waiver of covenants
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Capital; expenditures decline from 45.8% of revenues in 1995 to 10.8% of revenues by 2001 (also close to Microsoft’s experience);
V. Depreciation is held constant at 5.5% of revenues;
VI. Changes in net working capital of essentially zero;
VII. Long-term steady-state growth of 4% annually after 2005; and
VIII. A long-term riskless interest rate of 6.71%
IX. Given these assumptions and starting from its current base of $16.625 million, how fast must
Netscape grow on an annual basis over the next ten years to justify a $28 share value?
6. As an executive of Netscape, what would you recommend with respect to the proposed offering price? As an investor in Netscape, what would you recommend? AS a manager of an institutional fund who is willing to buy and hold Netscape’s stock at the originally proposed price of $14 per share, would you be willing to buy and hold at an initial offer price of $28.
LinkedIn
1. What set of assumptions underlie the $9 billion market valuation of LinkedIn as of the end of July 7, 2011. What is your assessment of those assumptions? Note that, based on the first seven weeks of trading for LinkedIn’s stocks, its estimated beta is 1.5.
2. What do you think LinkedIn’s intrinsic value is? Elaborate on your valuation methods.
3. If you wanted to buy LinkedIn’s stock, would you be willing to pay more than the value you derived above?
4. What other factors may be contributing to LinkedIn’s
The largest stakeholder of Netscape’s equity was Jim Clark, who accounted for 24%. The other primary owners were the venture capital firm Kleiner, Perkins, Caufield, & Byers, a group of six media companies led by Adobe Systems, and Netscape’s president and CEO, James Barksdale. They held 11%, 11%, and 10% of Netscape’s equity, respectively. The ownership shares of Netscape did not correspond to the investments made by the primary owners because the owners made their investments at different times. Jim Clark invested in Netscape first and therefore paid the least amount of money for the largest share of the firm. His second investment came at the same time as Kleiner Perkins, and at that point the price to purchase a share of Netscape had obviously increased. Clark’s total investment amounted to $3.5 million for 24% of the firm, whereas Kleiner Perkins paid $5 million for 11% of the firm. The investment made by the media companies came later, when the price of Netscape had risen even further. Therefore, the media firms purchased an aggregate 11% share of Netscape for $18 million. The final primary owner, Barksdale, was not said to have invested any capital in Netscape. However, as president and CEO, it can be assumed that he was offered a 10% share as an incentive to guide and motivate the company to perform well.
c. Did anything surprise you about the company's values? Why or why not? (1-3 sentences. 1.0 points)
3. Is CoMark an attractive investment? What are your major concerns with the proposed deal? How attractive is the purchase price?
information about a course of action on his part to which other executives might have
2) If you were the responsible manager at the ASIC Division, would you accept Western's offer?
For the corporation that has acquired another company, merged with another company, or been acquired by another company, evaluate the strategy that led to the merger or acquisition to determine whether or not this merger or acquisition was a wise choice. Justify your opinion.
2. What do you think the current market price is for Rosetta Stone shares? Justify your valuation using both discounted cash flow and comparables (market multiples) analysis.
B) How well has Berkshire Hathaway performed? In the aggregate? In its investment in Scott & Fetzer? In its investments in earlier purchases of GEICO stock? In its investments in convertible preferred securities?
1. What is your estimate of the value of Eskimo Pie Corporation as a stand alone company?
out why this merger came to fruition and the reasons it made strategic sense financially. Also, I evaluate
With multiple valuation numbers being arrived at ranging from 5.4 billion dollars to 173 billion, we believe that the most appropriate value for the organization is 12 billion dollars. It has been arrived at, by maintaining the industry standard of pricing a potential customer at a 173 dollars. The highest valuation we arrived at was by the DCF method (193 billion), this number is only plausible when we assume that the organization will grow at 7% indefinitely. On the other hand the organization was valued the
Evaluate the valuation and method used to determine the Initial Public Offering value of Facebook stock, indicating any miscalculations in the valuation that may have mislead potential investors and how these errors may have been minimized. Provide support for your response.
Q1. Describe the company selected (using financial and non-financial data) in terms of their history, corporate identity, company structure, capital structure, shareholding, competitive advantage and context in the market place.