a11clarkson - Autumn 2011 Managerial Finance Prof Francisco...

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Autumn 2011 Managerial Finance Prof. Francisco Pérez-González Valuing Clarkson Lumber Co. Big picture question: What is the value of the Clarkson Lumber Co? Read and prepare: Clarkson Lumber Company (reader) and the text that follows : Keith Clarkson, sole owner and president of the Clarkson Lumber Company, has decided to hire you as an advisor. Mr. Clarkson has received a number of informal inquiries about the availability of his company for purchase by larger, nationally-recognized building materials distributors. Although Clarkson relishes operating his business, he would be interested if an attractive offer were received. Unfortunately, Mr. Clarkson isn’t quite sure how to assess the value of his firm so he turns to you for guidance. You plan to: (1) analyze Clarkson’s historical financial statements, (2) assess Clarkson’s financial forecasts, and (3) interview Mr. Clarkson. At the end of your conversation with him, you learn that the loan negotiations with Mr. Dodge and the Northrup National Bank have failed. Tired of endless interactions with banks, Mr. Clarkson decides that if the company stays independent, it will become a 100 percent equity-financed firm. Luckily,
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