ACF: CONGOLEUM CORPORATION Summary Congoleum Corporation has three product market segments: home furnishings‚ shipbuilding and automotive and industrial distribution. In 1979‚ First Boston Corporation bid for an LBO of Congoleum for a price per share of $38. The purpose of this analysis is to assess Congoleum as a LBO candidate and determine whether the offer made by First Boston Corporation is fair. 1. Is Congoleum a good LBO candidate? In other words‚ does this company have a lot of debt
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Congoleum Corporation Executive Summary In valuing the target company Congoleum after an LBO by First Boston found the expected free cash flows generated by this firm from 1980 to 1984. These numbers were based on values provided in the case. From there‚ we employed the Adjusted Present Value method to discount these cash flows because we assumed that Congoleum was varying its Debt to Equity ratio during those years. We discounted these cash flows by the required return on assets that was in
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Question 1: Is Congoleum a good LBO candidate? In other words‚ does this company have a lot of debt capacity? 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: 1. Low level of debt – estimated long term debt
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UNIVERSITY OF MARYLAND Smith School of Business BUFN 750 Question Sheet: Congoleum Corporation Prof. Dalida Kadyrzhanova Spring 2013 In this case‚ you have to evaluate the LBO proposal and decide whether the $38 per share o¤er price is appropriate. You will combine the valuation principles and methods discussed in the course to evaluate a complex transaction from the perspectives of the various participants. Your write-up should address and defend the assumptions that underlie the inputs
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of Nicholson and to make the same offer to all stockholders‚ what offer must Cooper management make in terms of the dollar value and the form of payments? 5. What should Mr. Cizik recommend that the Cooper management do? CONGOLEUM CORP 1. WHAT CHARACTERISTICS OF CONGOLEUM MAKE IT A LIKELY CANDIDATE FOR A LEVERAGE BUYOUT? 2. WHY WOULD INSTITUTIONAL INVESTORS BE WILLING TO FINANCE A LEVERAGE BUYOUT WITH THE CAPITAL STRUCTURE PROPOSED? 3. WHAT RETURN WOULD BE APPROPRIATE FOR THE INSTITUTIONAL
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CASE QUESTIONS Cash Flows and Value. Cost of Capital Case 1: Hop-In Food Stores‚ Inc. 1. Determine the correct price for this particular IPO. Use several methods to do this and compare them. 2. What extra information would you try to acquire in a real life situation? Case 2: Chem-Cal Corporation 1. How do you calculate the WACC for this firm? 2. What is the cost of capital of the debt‚ preferred stock‚ and common stock (assume the equity beta is 1.22)? 3. Calculate the WACC. How can a WACC be used
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Disadvantages of Owning a Manufactured Home Rose Longacre Com/220 June 27 2010 Vanessa Paskaitis Disadvantages of Owning a Manufactured Home People purchase manufactured homes because they are cheaper. They also love the idea of being able to choose their own floor plan‚ they have a more open layout‚ and they have more square footage for the amount of money that was spent. Some may believe these are huge advantages. Although purchasing manufactured homes have their advantages
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1 The Value of Synergy Aswath Damodaran Stern School of Business October 2005 2 The Value of Synergy Many acquisitions and some large strategic investments are often justified with the argument that they will create synergy. In this paper‚ we consider the various sources of synergy and categorize them into operating and financial synergies. We then examine how best to value synergy in any investment and how sensitive this value is to different assumptions. We also look at how this synergy value
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INVESTMENT VALUATION: SECOND EDITION I will be putting my entire second edition online‚ while the book goes through the printing process - it will be available at the end of the year. This may seem like a bit of a free lunch‚ and I guess it is. I hope‚ though‚ that you can do me a favor as you go through the manuscript. If you find any mistakes - mathematical or grammatical - could you please let me know? It would help me ensure that the typos do not find their way into the final version. Chapter
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