3. Your Task Prepare report and PPT for your presentation 1. Background/Favorable and unfavorable to a potential strategic buyer and PE buyer 2. Working from case Exhibit 9, relative to the stand-alone value, estimate the dollar increase in DPC’s value if a PE fund can obtain: A. 5% revenue growth per annum (versus 4% growth) in each of the next five years and improve the operating margin to 12% (versus 10%). B. Assume part A and that the division can be sold at 7.5× EBITDA (Terminal multiple) in five years. C. Assume part A and part B and that debt financing equal to 6.0× forward EBITDA can be obtained. Assume that all cash available to pay debt each year (i.e., residual cash flow) is used to pay down the a. LBO debt and that, after five years, the firm will revert to an all-equity firm. 3. If a PE sponsor has a target return of 20% on its funds (equity contribution), what is the maximum enterprise value it can offer for DPC under parts b and c above?
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