4. (25 points) APV/LBO: Based on the information contained in the following table and the assumptions outlined below, calculate Teflon's Enterprise Value. - 2011 Sales Revenues = $6,500 - All cash available each year (i.e., residual cash flow) will be used to pay down the LBO debt until 2016. - The debt balance at the end of 2016 will remain constant in perpetuity. - The continuing value at the end of 2016 as a multiple of EBITDA assumes all equity financing. - Currency values may be rounded to zero decimal places Questions: a) Calculate free cash flow for the period 2012-16 (4 points) b) Calculate the Base Case Value (7 points) c) Calculate debt balances, interest, and tax shields for the period 2012-16 (7 points) d) Calculate Enterprise Value (7 points) Teflon Performance Coatings Metric 2011 2012 2013 6.0% Sales Growth (%) Depreciation and Amortization EBITDA Margin (Pretax) Tax Rate Net Assets (% of Sales) Terminal 2016 EBITDA Multiple () Debt/EBITDA 2011(x) Blended Interest Rate on Debt Unlevered Cost of Equity 12,5% $104 25.0% 30% 40% 6,0% $115 25,0% 30% 40% $118 25,0% 30% 40% Projected 2014 2015 6.0% 6.0% $122 $125 25.0% 25,0% 30% 30% 40% 40% 2016 6,0% $130 25.0% 30% 40% 8,0 6,0 5,00% 11,0% 4. (25 points) APV/LBO: Based on the information contained in the following table and the assumptions outlined below, calculate Teflon's Enterprise Value. - 2011 Sales Revenues = $6,500 - All cash available each year (i.e., residual cash flow) will be used to pay down the LBO debt until 2016. - The debt balance at the end of 2016 will remain constant in perpetuity. - The continuing value at the end of 2016 as a multiple of EBITDA assumes all equity financing. - Currency values may be rounded to zero decimal places Questions: a) Calculate free cash flow for the period 2012-16 (4 points) b) Calculate the Base Case Value (7 points) c) Calculate debt balances, interest, and tax shields for the period 2012-16 (7 points) d) Calculate Enterprise Value (7 points) Teflon Performance Coatings Metric 2011 2012 2013 6.0% Sales Growth (%) Depreciation and Amortization EBITDA Margin (Pretax) Tax Rate Net Assets (% of Sales) Terminal 2016 EBITDA Multiple () Debt/EBITDA 2011(x) Blended Interest Rate on Debt Unlevered Cost of Equity 12,5% $104 25.0% 30% 40% 6,0% $115 25,0% 30% 40% $118 25,0% 30% 40% Projected 2014 2015 6.0% 6.0% $122 $125 25.0% 25,0% 30% 30% 40% 40% 2016 6,0% $130 25.0% 30% 40% 8,0 6,0 5,00% 11,0%