1. Assess DuPont Performance Coating's (DPC, hereafter) fit within DuPont. What are its prospects going forward as a division within DuPont versus its potential value to an outside party?

2. How attractive is DPC as an acquisition from a strategic buyer? What are the potential risks to such a deal?

3. How attractive is DPC as an acquisition from a PE firm's perspective? What are the potential risks to such a deal?

a. Highlight any relevant industry characteristics, and/or market and macroeconomic trends.

4. What are some of the important features of APV, and why is it a useful approach for valuing

an LBO?

a. Compare and contrast with equity residual cash flows (RCF) or levered cash flows.

5. Working from Exhibit 9, relative to the stand-alone valuation, 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 x EBITDA in five years.

c. Assume part (a) and part (b), and that debt financing equal to 6 x forward EBITDA

can be obtained.

6. 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?

a. If tax shields from the use of debt are not a large source of value, why can a PE

sponsor pay so much more if leverage is used?

b. Suppose the PE firm decides to bid $5,281 million for the firm. What would be its

expected return on its equity investment in the case of leverage versus no leverage?

7. What minimum bid should Ellen Kullman set if she chooses to sell DPC?