Congoleum Corporation

2) One way that Hertz conforms to be an “ideal LBO candidate” is the proven financial performance and pretax profit the company has generated since 1967. In addition, from 1985 to 2005, revenues

9. What is the Cost of Debt, before and after taxes? Using the interest rate for the largest debt…cannot use the weighted interest rate for the debt since it includes capital lease obligations with no stated rate and could not find in the notes to the financials. 5.4% After tax cost is .054 x (1-.36) = 3.5%

To judge if a company is a good LBO candidate the following are very important factors: low levels of debt in the target, stable cash flows, excess cash on-hand, assets that can be used as collateral to raise debt and no major capital requirements to keep the business running on an on-going basis. Congoleum is an ideal LBO candidate because:

Ø In calculating value of debt, Cohen should have discounted the value of long-term debt that appears on the balance sheet. It means she should also consider the future value of total long term debt base on coupon rate.

To judge if a company is a good LBO candidate the following are very important factors: low levels of debt in the target, stable cash flows, excess cash on-hand, assets that can be used as collateral to raise debt and no major capital requirements to keep the business running on an on-going basis. Congoleum is an ideal LBO candidate because:

Long-term liabilities: Note Payable with total balance due in 5 years and Mortgage Loan with payments made monthly over 5 years.

This paper focuses on a company analysis of Molson Coors Brewing Company. The second part of the project will give a better understanding of the company by analyzing their stock price, total cost of

Government interest rates from Table B, 8.72%. The 10 year rate was chosen to be consistent with time lengths. Then the value for equity, debt and the firm need to be calculated, this is a simple step. The market price of the shares is multiplied by the number of outstanding shares to find the value of equity and the book value of long term debt is used for the value of debt and the value of both equity and debt are added together to come up with the value of the firm. The weight of the equity and debt can now be calculated by dividing the value of equity or debt by the value of the company. Lastly, the tax rate was calculated by using the balance sheet, given in exhibit 1, to determine income taxes paid and dividing it by earnings before interest and taxes for each of the last ten years then by taking the average of the ten years tax rates.

DebtThe first component of a firms WACC is its cost of debt. This is the effective rate that a company pays on its current debt. Because interest expenses on debt are deductible, the after-tax cost is used in its calculation. Cost of debt is calculated by multiplying the before-tax rate by one minus the marginal tax rate. As given in the Silicon Valley case assignment handout, SIVMED's long-term debt consists of 9.5% coupon, semiannual payment bonds with 15 years to maturity. The bonds last traded at a price of $891.00 per $1,000 par value bond. Given this data, SIVMED's cost of debt is calculated at 6.6% .

Thus the WAVG Cost of Debt (including L/T debt and preferred stock) = rd = 8.633%

Valuation calculations are the attached tables (Appendix 1 and 2).Assumptions made: Assumed rates of period 1985-1991: Inflation rate of Tunisa (assumed) Subsidized interest rate Tunisia (assumed) Opportunity cost of capital for Prince (%) Corporate income tax rate Tunisia (%) Corporate income tax rate UK (%) Jersey D/E ratio(assumed) 8.50% 8.50% 25% 43.80% 35.00% 13.3% Inflation rate of UK Spot exchange rate JERSEY Beta UK Market risk premiun Riskfree rate UKCorporate Long Term Borrowing Rate 5% 1.009 1.34 7% 9.6% 9.9%

The machine will have a depreciation of $140,000 for the first five years; this is determined by dividing the initial investment by five. The old machine will be sold in 2010 for $25,000 which is below the current book value of $36,000. This is why there is a capital gain of $3,850 that will add to the incremental savings plus the depreciation for that year. The new sheeter will be sold at the end of the last year for $120,000 which will be taxed at 35; this is why a cost of $42,000 appears for the last cash flow (Exhibit 1). The NPV is a positive $1,063,567 and the IRR is 36%, this shows that the project will add value to the company along with having a great return. The payback period for the project is 2.45…Using the growth rate of 3%, the sales are projected to be nearly doubled from 2009 with the new sheeter. However, Pitts believes that he would not be surprised to see them increase by 7% or

If the market value of a stock is lower than its intrinsic value, this stock is defined as “trades at a discount”. To figure out whether AGI stock is traded at a discount to comparable companies, as its management believed, we can simply apply multiple which comes from the average multiple of its comparable companies. Considering fluctuation of future after-tax earnings caused by the change in capital structure, we prefer to use TEV/EBITDA multiple in this case. Amtelecom Group consists of two lines of business which has to been taken into consideration. We separately calculate the value of both companies and their

After have a meeting with the CEO, investment capital will be the main concern in this stage. Compare with the other two transactions the price of Yellowstone Cattle Bank equity1 is the cheapest and even can achieve the level to use the word attractive. In this case due to the cheaper price of YCB, it reduces the pressure by seeking the investment capital. On the other hand because of the industry essential and business model, it is impossible that YCB would carry a large amount of debt. From the Newport’s view of point it is good news for them to infuse the debt to buy out this company by using the LBO method.

And we calculated the weight of debt which was Weight of debt for P&S= [(13.1%+5.3%)/2]= 9.2%