Answer the 11 questions for the attached valuation project.Provide high level analysis and support by excel calculations. Please suggest a reasonable price. Thank you

Provide high level analysis and support by excel calculations. Points Narrative VALUATION PROJECT Additional Excel Information (As Needed) 1. From a balance sheet perspective, how would you describe ITStaffing's financial performance and status? 2. From an income statement perspective, how would you describe ITStaffing's financial performance and status? 3. When reviewing the WACC and CAPM worksheet, what conclusions do you make about industry-related comparables and how it may impact the valuation for ITStaffing? 4. When reviewing the Market Valuation worksheet, what conclusions do you make about industry-related comparables and how it may impact the valuation for ITStaffing? Would you specifically include or exclude any specific company or metric as a basis for valuation? 5. When reviewing the Comparable Transactions worksheet, what conclusions do you make about transaction-related comparables and how it may impact the valuation for ITStaffing? Would you specifically include or exclude any specific company or metric as a basis for 6. What is the value of ITStaffing and what are the valuation drivers you are using (ex. which valuation approach and which relevant financial comparable)? 7. What revenue growth rates should be used for 2012 to 2015 and why? What gross margin and SG&A margins should be used for 2012-2015 and why? 8. How does the valuation of ITS compare to the consideration being offered? 9. Are there any other deal structures, terms, alternatives or modifications to either offer that would make this a more appealing transaction to one or more of the founders? 10. What is your recommendation to the client? Provide any additonal supplementary information as needed incorporating conecpts from class on? for valuation? Please reference the following case study and related spreadsheet as part of the discussion for this week and subsequent weeks: ITStaffing, Inc. ("ITS" or the "Company") is one of the fastest growing IT staffing firms in the United States. The company matches highly-skilled IT professionals with temporary assignments and full-time positions across a broad range of large- to medium-sized corporations. During the last ten years, ITS has successfully scaled its operations across multiple offices, resulting in extraordinary revenue growth. The Company is still owned by its three founders, David, Eduardo and Andy. Over the past year, Andy has expressed an interest in cashing out of ITS in order to pursue other ventures. Although David and Eduardo remain highly committed to the business, they have also considered cashing in on their hard work and have explored a sale of the business. Although no formal M&A process has yet been conducted, two offers are on the table pending further due diligence. The first offer is a cash and stock offer for the entire company from a well-capitalized strategic buyer. The second offer is a minority investment from a financial sponsor, using a mix of debt and sponsor equity to finance the transaction. In recent weeks, Andy has been increasingly pushing for a "broad process" in order to secure the highest possible value for his stake. David, however, has been having second thoughts about selling ITS, and fears that a sale process could potentially result in ITS losing its competitive advantage. ITS Background In 2001, after working for four years in the staffing industry and observing an ever-increasing demand for highly-skilled IT professionals, David decided to start his own firm. Joining him was co-worker and friend Andy, and former colleague Eduardo. Starting from a 900 square foot office in Coconut Grove, Florida, David, Andy and Eduardo grew their business to 16 offices in major metropolitan areas across the U.S. The Company is now one of the leading IT staffing firms in the nation, providing clients with a range of highly-skilled IT professional's on a project or full-time basis. ITS has distinguished itself in the industry by being able to consistently recruit the highest quality IT professionals and match their unique skills to meet a client's most pressing IT needs, as well as deliver faster placement results and provide a more consistent level of service than their competitors. Furthermore, since inception, ITS has focused on building a scalable business model for expansion into new markets, and has been able to successfully open new offices with limited capital investment. During the Company's ten year history it has successfully scaled its operations, with revenue growing from $9.4 million in 2003 to $203.3 million in 2011 (a CAGR of 46.9%). EBITDA was $38.6 million in 2011. Despite the economic uncertainty over the last few years, including a decline in temporary staffing penetration, ITS has continued to grow rapidly, with revenues increasing at a CAGR of 17.0% since 2008. More impressively, as of 2011, the Company's EBITA margins were more than double those of any of its public comparable companies. Situation Early in the summer, with the U.S. economy appearing to be heading towards a recovery, Andy received news of a large acquisition within the employment services industry. The deal, valued at 14.9x the target's LTM EBIT, prompted Andy to speak informally with a banker he had previously met. After providing the banker with some general information, the banker told Andy that ITS was worth "no less than $300 million" and "probably a lot more." Excited about the opportunity to be worth "nearly nine figures," Andy began pitching the idea of a sale to David and Eduardo. Hearing that ITS may be on the market, two parties, StaffCo International, Inc. ("Sta Co") and High Growth Equity ("HGE") both expressed significant interest, submitting nonbinding bids, including proposed deal structures, based on information each had received from "credible sources." Background on the Offers ITS has recently been approached by two potential buyers, StaffCo and HGE. Consideration for each of the proposed transactions is outlined below: The StaffCo Offer Purchase of 100% of ITS' common equity Sellers would receive: a. Cash consideration of $220 million b. 5.671 million shares of StaffCo's common equity, valued at $140 million The HGE Offer Purchase of 40% of ITS' common equity for $95 million Term loan of $60 million, at Libor + 700 basis points (Libor floor of 150 basis points) Subordinated debt of $20 million, at 12% cash interest & 2% PIK Interest Up to $15 million in additional cash consideration, subject to the vesting schedule outlined in the appendix Cash to sellers equates to $175 million StaffCo Background StaffCo International, Inc., headquartered in Seattle, Washington, is a global employment services firm with over $4.5 billion in revenue and a market cap of nearly $5.0 billion. The company offers temporary staffing and permanent placement services in the accounting and finance, IT, legal, marketing and administrative fields. StaffCo has more than 450 locations in over 20 countries worldwide. ITS' capabilities and client relationships represent a great complement to StaffCo' s existing portfolio. StaffCo, which has historically focused on accounting and finance staffing, is looking to build out its IT segment, which currently represents less than 10% of the company's total revenues. StaffCo also views the acquisition as an opportunity to shift its staffing mix towards higher-skilled professionals. Although StaffCo has only made one acquisition since 2008, prior to the economic downturn the company had been highly acquisitive and was well respected in the industry for its ability to seamlessly integrate acquired companies into its portfolio. HGE Background High Growth Equity, headquartered in New York, New York, is a private equity firm that focuses on making minority investments in leading middle market companies. HGE, which has approximately $2 billion in equity capital under management and is currently investing its $1.2 billion HGE II Fund, seeks to invest in companies operating in the retail, consumer products, financial services and business services sectors. The fud typically invests between $60 million to $120 million in companies having enterprise values between $100 million and $400 million and EBITDA in excess of $15 million. In the past, HGE has successfully invested in two employment services firms and is excited about the opportunity to invest in a company focused on higher-skilled labor. If a deal were to close, HGE would expect each of ITS' three founders to remain with the Company for a period of no less than three years. Additionally, HGE would seek to create a seven member board, with the ability to elect three of the seven members. Industrv Highlights In the U.S., the staffing industry is large and expanding, generating revenues of over $97 billion in 2010, $87.4 billion from temporary and contract staffing and $9.7 billion from search and permanent placement services. The staffing industry is anticipated to grow faster and add more new jobs over the next decade than just about any other industry in the U. S. The staffing industry has been progressively shifting towards higher skilled and higher paid positions. Many industry forecasts predict a significant shortage of qualified workers in the IT, nursing, and physician fields. A key risk for staffing companies is overall economic growth, as staffing is highly correlated to GDP. During periods of low demand, pricing becomes increasingly competitive and gross margins typically decrease. IT staffing is the largest segment in the professional staffing space, accounting for approximately 43% of all professional staffing revenue. ~ Over the past decade, the Internet has become critical to the operations of many businesses. For many companies it is uneconomical to hire full-time IT staff, and relying on temporary staffing presents a better solution. The IT staffing segment has recovered faster than most other staffing segments during the last two years, driven by strong investment in IT by corporations, new technological advancements, and a shortage of qualified workers with IT skills. IT staffing revenue increased by 13% in 2011 and is expected to increase by 12% in 2012. Although there has been a fair amount of consolidation recently, the IT staffing segment remains highly fragmented. The three largest global temporary-staffing firms have acquired three of the largest IT temporary-staffing firms in the United States during the last two years. Other Factors to Consider in a Potential Transaction David, ITS' CEO, owns 50% of the business, while Andy (CFO) and Eduardo (COO) each own 25%. Each of the Company's three founders receives a salary of $50,000. Industry practices suggest that a $350,000 salary is considered appropriate for David's position, while a $250,000 salary is appropriate for Andy and Eduardo's positions. In 2010 and 2011, the founders have issued special dividends of $10 million and $12 million, respectively. If ITS is not sold, it is anticipated that the Company would continue to issue such dividends. Recently, David and Andy have had conflicting opinions regarding ITS' business outlook. While David is optimistic that margins will remain high, even grow, Andy is concerned that increasing competition and ITS' ever expanding branch network, as well as a relatively weak U.S. economy, may begin to place pressure on the Company's margins. Similarly, David and Andy have had conflicting opinions regarding ITS' top line growth. While Andy sees growth slowing given increased competition, David is optimistic that the Company can continue to expand rapidly. Information Provided Financial and other data for ITS and companies that preliminarily identified as comparable to our client to assist you in your evaluation. As part of a process to evaluate similar transactions as these, analyze competing offers, and advise clients on their options, please make sure to address the questions on the following worksheet: IT Staffing Inc. Historical Balance Sheet ($ in millions) Fiscal Year Ended December 31, 2009 2010 2011 Actual Actual Actual CURRENT ASSETS Cash and cash equivalents Accounts receivable, net Other current assets Total current assets $ LONG-TERM ASSETS Fixed assets, net Other assets Total long-term assets 8.7 $ 23.1 0.4 32.2 1.6 0.5 2.0 Total assets 19.2 $ 25.6 4.5 49.3 1.9 0.6 2.5 36.6 Added back the 2 years of Dividends 34.2 3.7 74.5 2.3 0.6 2.9 $ CURRENT LIABILITIES Accounts payable Accrued expenses Accrued payroll Total current liabilities 34.3 $ 51.8 $ 77.4 $ 3.3 $ 0.7 2.5 6.5 2.3 $ 0.5 3.5 6.3 3.0 0.7 4.3 8.1 0.2 0.2 0.2 0.2 0.3 0.3 8.4 LONG-TERM LIABILITIES Other liabilities Total long-term liabilities Total liabilities $ 6.7 $ 6.6 $ Shareholders' equity $ 27.5 $ 45.2 $ 69.1 Added back the 2 years of Dividends Total liabilities & shareholders' $ 34.3 $ 51.8 $ 77.4 Profit Margin Asset Turnover Equity Multiplier ROE D/E 1-Tax Unlevered Beta Levered Beta 11.5% 2.63 1.12 33.9% 10.8% 62.5% 1.29 1.38 IT Staffing Inc. Historical and Projected Income Statements 24.2% ($ in millions) 2009 Actual Revenue % Growth $ 2011 Actual Fiscal Year Ended December 31, 2012 2013 Projected Projected $ Selling, general and administrative expenses (Includes additional 700k for Officers' Salaries Depreciation and amortization Operating income Operating Margin $ Interest expense (income) Cash Interest Rate Earnings before taxes Tax expense (1) Net income 2015 Projected $ Tax = $ 131.8 $ 3.9% 161.2 $ 22.3% 203.3 $ 26.1% 235.8 $ 16.0% 259.9 $ 10.2% 280.8 $ 8.1% 299.3 6.6% 91.4 40.4 $ 30.7% 105.1 56.1 $ 34.8% 129.0 74.3 $ 36.6% 150.2 85.6 $ 36.3% 166.6 93.3 $ 35.9% 178.6 102.2 $ 36.4% 189.4 109.8 36.7% 23.2 17.6% 0.3 16.9 $ 12.9% 28.1 17.4% 0.4 27.5 $ 17.1% 36.4 17.9% 0.5 37.4 $ 18.4% 42.0 17.8% 0.6 43.0 $ 18.3% 47.3 18.2% 0.6 45.4 $ 17.5% 52.2 18.6% 0.7 49.3 $ 17.6% 56.9 19.0% 0.7 52.2 17.5% (0.0) 0.4% 27.6 (0.0) 0.3% 37.5 (0.1) 0.3% 43.1 (0.1) 0.3% 45.4 (0.1) 0.3% 49.4 (0.2) 0.3% 52.4 6.37 10.6 $ 10.34 17.2 $ 14.06 23.4 $ 17.2 25.9 $ 18.2 27.3 $ 19.8 29.7 $ 21.0 31.4 37.5% 17.26 $ 0.8 37.5% 27.95 $ 0.7 37.5% 37.94 $ 0.8 43.6 $ 1.0 46.0 $ 1.1 50.0 $ 1.2 53.0 1.3 (1) Projected tax rate @ 40% 2 Year CAGR EBIT EBIT Growth EBIT/Rev NI/Rev EBITDA Growth NI Growth 2014 Projected (0.0) 0.5% 17.0 Direct costs of services Gross profit Gross margin Supplemental Items EBITDA Capex 2010 Actual 16.9 12.855% 8.049% 27.5 62.556% 17.086% 10.691% 61.963% 62.439% 37.4 35.935% 18.418% 11.522% 35.730% 35.911% 49.246% 48.847% 49.175% Weighted Average Cost of Capital ($ in millions) Preferred Stock Debt Hudson Highland Group Inc. Kforce Inc. Randstad Holding NV Robert Half International Inc. Robert Walters plc 7.7 61.1 2,319.0 1.7 18.8 Median Mean $ 18.79 481.65 Levered Beta $ - Hudson Highland Group Inc. Kforce Inc. Randstad Holding NV Robert Half International Inc. Robert Walters plc 1.69 1.53 1.32 1.45 0.96 Unlevered Beta 1.64 1.42 1.04 1.45 0.91 Median Mean 1.45 1.39 1.42 1.29 Market Assumptions Risk Free Rate Equity Risk Premium Tax Rate CAPM =Rf +B (MRP) 4.50% 5.75% 40.0% 11.93% 4.75% 10.64% ### 6.75% 13.22% Market Value of Equity 154.0 472.2 5,133.8 3,782.4 223.3 $ 472.20 1,953.14 Equity Risk Premium 5.75% 5.75% 5.75% 5.75% 5.75% Debt to Equity 5.0% 12.9% 45.2% 0.0% 8.4% Debt to Total Capitalization 4.7% 11.5% 31.1% 0.0% 7.8% Preferred to Total Capitalization 0.0% 0.0% 0.0% 0.0% 0.0% Equity to Total Capitalization 95.3% 88.5% 68.9% 100.0% 92.2% 533.34 2,434.79 8.4% 14.3% 7.8% 11.0% 0.0% 0.0% 92.2% 89.0% Size Risk Premium 4.45% 2.49% 0.85% 0.85% 2.85% Cost of Equity 18.7% 15.8% 13.0% 13.7% 12.9% 6.3% 3.0% 2.8% 9.0% 6.3% Cost of Preferred 0.0% 0.0% 0.0% 0.0% 0.0% WACC 18.0% 14.2% 9.5% 13.7% 12.2% 6.3% 5.5% 0.0% 0.0% 13.7% 13.5% Total Capitalization 161.7 533.3 7,452.8 3,784.1 242.1 $ 13.7% 14.8% Cost of Debt Free Cash Flow Valuation Downside ($ in millions) 2009 Actual Revenue % Growth $ 2014 Projected 2015 Projected $ Selling, general and administrative expenses Depreciation and amortization Operating income Operating Margin $ Interest expense (income) Cash Interest Rate Earnings before taxes Tax expense (1) Net income $ Tax = $ (1) Projected tax rate @ 40% (1) Discount Rate (Rf + B(MRP)) 11.93% Income Approach 131.8 $ 3.9% 161.2 $ 22.3% 203.3 $ 26.1% 233.8 $ 15.0% 254.8 $ 9.0% 273.9 $ 7.5% 290.4 6.0% 91.4 40.4 $ 30.7% 105.1 56.1 $ 34.8% 129.0 74.3 $ 36.6% 149.6 84.17 $ 36.0% 164.6 90.21 $ 35.4% 178.1 95.88 $ 35.0% 190.2 100.18 34.5% 23.2 17.6% 0.3 16.95 $ 12.9% 28.1 17.4% 0.4 27.55 $ 17.1% 36.4 17.9% 0.5 37.44 $ 18.4% 42.1 18.0% 0.6 41.48 $ 17.7% 46.1 18.1% 0.7 43.39 $ 17.0% 49.9 18.2% 0.8 45.22 $ 16.5% 53.1 18.3% 0.9 46.18 15.9% (0.0) 0.5% 17.0 Direct costs of services Gross profit Gross margin Supplemental Items EBITDA Capex Fiscal Year Ended December 31, 2011 2012 2013 Actual Projected Projected 2010 Actual (0.0) 0.4% 27.6 (0.0) 0.3% 37.5 (0.1) 0.3% 41.5 (0.1) 0.3% 43.5 (0.1) 0.3% 45.4 (0.2) 0.3% 46.4 6.4 10.6 $ 10.3 17.2 $ 14.1 23.4 $ 16.6 24.9 $ 17.4 26.1 $ 18.1 27.2 $ 18.5 27.8 37.5% 17.26 $ 0.8 37.5% 27.95 $ 0.7 37.5% 37.94 $ 0.8 40.0% 42.08 $ 1.0 40.0% 44.09 $ 1.2 40.0% 46.02 $ 1.3 40.0% 47.04 1.4 10.64% 13.22% 2009 DCF Method EBIT Taxes Rate Taxes NOPAT NOA (Total Assets)-(Total Liabilities-Total Debt) Increase in NOA FCFF 2010 2011 2012 16.95 37.5% 6.35 10.59 27.55 27.55 37.5% 10.33 17.22 45.22 17.67 (0.46) 37.44 37.5% 14.04 23.40 69.08 23.86 (0.46) 2013 Projected 43.39 40.0% 17.35 26.03 86.60 7.15 18.88 41.48 40.0% 16.59 24.89 79.45 10.36 14.53 CAPM 11.93% Free Cash Flow Growth ITS Terminal Value $ 2% 227.33 $ 3% 255.27 $ 4% 290.27 $ 5% 335.36 $ $ 201.26 $ 219.06 $ 241.36 $ 270.10 $ 308.53 1.0 5.3 5.4 8.6 1.1 5.8 5.9 9.4 1.2 6.4 6.4 10.3 1.3 7.1 7.2 11.5 45.22 40.0% 18.09 27.13 93.09 6.49 20.64 6% 395.68 ITS Enterprise Value 2014 Multiple to 2011 Rev Multiple to 2011 EBITDA Multiple to 2011 EBIT Multiple to 2011 NI 10.64% Free Cash Flow Growth Post 2015 ITS Terminal Value 1.5 8.1 8.2 13.2 $ 2% 261.19 $ 3% 298.27 $ 4% 346.52 $ 5% 411.88 $ 6% 505.42 ITS Enterprise Value $ 232.40 $ 257.15 $ 289.35 $ 332.97 $ 395.39 1.1 6.1 6.2 9.9 1.3 6.8 6.9 11.0 1.4 7.6 7.7 12.4 1.6 8.8 8.9 14.2 Multiple to 2011 Rev Multiple to 2011 EBITDA Multiple to 2011 EBIT Multiple to 2011 NI 13.22% Free Cash Flow Growth Post 2015 ITS Terminal Value $ 2% 201.13 $ 3% 222.97 $ 4% 249.56 $ 5% 282.61 $ 6% 324.81 ITS Enterprise Value $ 177.19 $ 190.48 $ 206.66 $ 226.77 $ 252.46 0.9 4.7 4.7 7.6 0.9 5.0 5.1 8.1 1.0 5.4 5.5 8.8 1.1 6.0 6.1 9.7 Multiple to 2011 Rev Multiple to 2011 EBITDA Multiple to 2011 EBIT Multiple to 2011 NI 1.9 10.4 10.6 16.9 1.2 6.7 6.7 10.8 Operating Income Based Valuation CAPM 2009 11.93% EBIT NOPAT NOA ROPI PV(ROPI) PV of Horizon ROPI $ $ $ EBIT NOPAT NOA ROPI PV(ROPI) PV of Horizon ROPI $ $ $ EBIT NOPAT NOA $ $ $ 16.95 $ 10.59 $ 27.55 $ $ 2009 10.64% 16.95 $ 10.59 $ 27.55 $ $ 2009 13.22% 16.95 $ 10.59 $ 27.55 $ 2010 27.55 17.22 45.22 13.93 2011 $ $ $ $ $ 2010 27.55 17.22 45.22 14.29 37.44 23.40 69.08 18.01 18.01 2012 $ $ $ $ $ 2011 $ $ $ $ $ 2010 27.55 $ 17.22 $ 45.22 $ 37.44 23.40 69.08 18.59 18.59 41.48 24.89 79.45 16.65 14.87 2013 $ $ $ $ $ 2012 $ $ $ $ $ 2011 37.44 $ 23.40 $ 69.08 $ 41.48 24.89 79.45 17.54 15.86 43.39 26.03 86.60 16.55 13.21 2014 $ $ $ $ $ 2013 $ $ $ $ $ 2012 41.48 $ 24.89 $ 79.45 $ 43.39 26.03 86.60 17.58 14.36 45.22 27.13 93.09 16.80 11.98 2015 $ $ $ $ $ $ 2014 $ $ $ $ $ 2013 43.39 $ 26.03 $ 86.60 $ 45.22 27.13 93.09 17.92 13.24 46.18 27.71 98.68 16.60 10.58 68.66 2015 $ $ $ $ $ $ 2014 45.22 $ 27.13 $ 93.09 $ 46.18 27.71 98.68 17.81 11.89 73.94 2015 46.18 27.71 98.68 2015 46.18 40.0% 18.47 27.71 98.68 5.59 22.12 ROPI PV(ROPI) PV of Horizon ROPI CAPM 11.93% Growth Rate Terminal ROPI PV of Terminal ROPI ITS Enterprise Value 10.64% Growth Rate Terminal ROPI PV of Terminal ROPI ITS Enterprise Value 13.22% Growth Rate Terminal ROPI PV of Terminal ROPI ITS Enterprise Value $ 13.57 $ $ 17.43 $ 17.43 $ 15.76 $ 13.92 $ 15.53 $ 12.12 $ $ $ 2% 16.94 $ 108.66 $ 3% 17.10 $ 122.01 $ 4% 17.27 $ 138.73 $ 5% 17.43 $ 160.28 $ 6% 17.60 189.09 $ 177.32 $ 190.67 $ 207.39 $ 228.94 $ 257.75 $ $ 2% 18.17 $ 140.31 $ 3% 18.34 $ 160.23 $ 4% 18.52 $ 186.15 $ 5% 18.70 $ 221.26 $ 6% 18.88 271.51 $ 208.97 $ 228.89 $ 254.81 $ 289.92 $ 340.17 $ $ 2% 15.71 $ 85.22 $ 3% 15.87 $ 94.48 $ 4% 16.02 $ 105.74 $ 5% 16.17 $ 119.75 $ 6% 16.33 137.63 $ 153.88 $ 163.14 $ 174.40 $ 188.41 $ 206.29 15.69 $ 10.81 $ $ 15.40 9.38 63.64 Free Cash Flow Valuation ($ in millions) 2009 Actual Revenue % Growth $ 2014 Projected 2015 Projected $ Selling, general and administrative expenses Depreciation and amortization Operating income Operating Margin $ Interest expense (income) Cash Interest Rate Earnings before taxes Tax expense (1) Net income $ Tax = $ (1) Projected tax rate @ 40% (1) Discount Rate (Rf + B(MRP)) 11.93% Income Approach 131.8 $ 3.9% 161.2 $ 22.3% 203.3 $ 26.1% 235.8 $ 16.0% 259.9 $ 10.2% 280.8 $ 8.1% 299.3 6.6% 91.4 40.4 $ 30.7% 105.1 56.1 $ 34.8% 129.0 74.3 $ 36.6% 150.2 85.6 $ 36.3% 166.6 93.3 $ 35.9% 178.6 102.2 $ 36.4% 189.4 109.8 36.7% 23.2 17.6% 0.3 16.95 $ 12.9% 28.1 17.4% 0.4 27.55 $ 17.1% 36.4 17.9% 0.5 37.44 $ 18.4% 42.0 17.8% 0.6 43.04 $ 18.3% 47.3 18.2% 0.6 45.36 $ 17.5% 52.2 18.6% 0.7 49.29 $ 17.6% 56.9 19.0% 0.7 52.23 17.5% (0.0) 0.5% 17.0 Direct costs of services Gross profit Gross margin Supplemental Items EBITDA Capex Fiscal Year Ended December 31, 2011 2012 2013 Actual Projected Projected 2010 Actual (0.0) 0.4% 27.6 (0.0) 0.3% 37.5 (0.1) 0.3% 43.1 (0.1) 0.3% 45.4 (0.1) 0.3% 49.4 (0.2) 0.3% 52.4 6.37 10.6 $ 10.34 17.2 $ 14.06 23.4 $ 17.2 25.9 $ 18.2 27.3 $ 19.8 29.7 $ 21.0 31.4 37.5% 17.26 $ 0.8 37.5% 27.95 $ 0.7 37.5% 37.94 $ 0.8 40.0% 43.6 $ 1.0 40.0% 46.0 $ 1.1 40.0% 50.0 $ 1.2 40.0% 53.0 1.3 10.64% 13.22% 2009 DCF Method 1 EBIT Taxes Rate Taxes NOPAT NOA (Total Assets)-(Total Liabilities-Total Debt) Increase in NOA FCFF 2010 2011 2012 16.95 37.5% 6.35 10.59 27.55 27.55 37.5% 10.33 17.22 45.22 17.67 (0.46) 37.44 37.5% 14.04 23.40 69.08 23.86 (0.46) 2013 Projected 45.36 40.0% 18.14 27.21 88.31 8.18 19.04 43.04 40.0% 17.22 25.83 80.14 11.05 14.77 CAPM 11.93% Free Cash Flow Growth Post 2015 ITS Terminal Value $ 2% 257.63 $ 3% 289.30 $ 4% 328.96 $ 5% 380.07 $ $ 224.09 $ 244.27 $ 269.54 $ 302.10 $ 345.66 1.1 5.9 6.0 9.6 1.2 6.4 6.5 10.4 1.3 7.1 7.2 11.5 1.5 8.0 8.1 12.9 49.29 40.0% 19.72 29.58 95.43 7.12 22.46 6% 448.43 ITS Enterprise Value 2014 Multiple to 2011 Rev Multiple to 2011 EBITDA Multiple to 2011 EBIT Multiple to 2011 NI 10.64% Free Cash Flow Growth Post 2015 ITS Terminal Value 1.7 9.1 9.2 14.8 $ 2% 296.01 $ 3% 338.03 $ 4% 392.72 $ 5% 466.79 $ 6% 572.80 ITS Enterprise Value $ 259.30 $ 287.34 $ 323.84 $ 373.27 $ 444.01 1.3 6.8 6.9 11.1 1.4 7.6 7.7 12.3 1.6 8.5 8.6 13.8 1.8 9.8 10.0 15.9 Multiple to 2011 Rev Multiple to 2011 EBITDA Multiple to 2011 EBIT Multiple to 2011 NI 13.22% Free Cash Flow Growth Post 2015 ITS Terminal Value $ 2% 227.94 $ 3% 252.70 $ 4% 282.82 $ 5% 320.28 $ 6% 368.11 ITS Enterprise Value $ 196.89 $ 211.95 $ 230.29 $ 253.08 $ 282.19 1.0 5.2 5.3 8.4 1.0 5.6 5.7 9.0 1.1 6.1 6.2 9.8 1.2 6.7 6.8 10.8 Multiple to 2011 Rev Multiple to 2011 EBITDA Multiple to 2011 EBIT Multiple to 2011 NI 2.2 11.7 11.9 19.0 1.4 7.4 7.5 12.0 Operating Income Based Valuation CAPM 2009 11.93% EBIT NOPAT NOA ROPI PV(ROPI) PV of Horizon ROPI $ $ $ EBIT NOPAT NOA ROPI PV(ROPI) PV of Horizon ROPI $ $ $ EBIT NOPAT NOA ROPI PV(ROPI) $ $ $ 16.95 $ 10.59 $ 27.55 $ $ 2009 10.64% 16.95 $ 10.59 $ 27.55 $ $ 2009 13.22% 16.95 $ 10.59 $ 27.55 $ $ 2010 27.55 17.22 45.22 13.93 2011 $ $ $ $ $ 2010 27.55 17.22 45.22 14.29 $ $ $ $ $ 2011 $ $ $ $ $ 2010 27.55 17.22 45.22 13.57 37.44 23.40 69.08 18.01 18.01 2012 37.44 23.40 69.08 18.59 18.59 37.44 23.40 69.08 17.43 17.43 $ $ $ $ $ 2012 $ $ $ $ $ 2011 $ $ $ $ $ 43.04 25.83 80.14 17.59 15.71 2013 43.04 25.83 80.14 18.48 16.70 43.04 25.83 80.14 16.69 14.75 $ $ $ $ $ 2013 $ $ $ $ $ 2012 $ $ $ $ $ 45.36 27.21 88.31 17.66 14.09 2014 45.36 27.21 88.31 18.69 15.27 45.36 27.21 88.31 16.62 12.97 $ $ $ $ $ $ 2014 $ $ $ $ $ 2013 $ $ $ $ $ 49.29 29.58 95.43 19.04 13.58 2015 49.29 29.58 95.43 20.18 14.90 2015 $ $ $ $ $ $ 2014 $ $ $ $ $ 49.29 29.58 95.43 17.90 12.34 52.23 31.34 101.70 19.96 12.72 74.11 52.23 31.34 101.70 21.19 14.14 79.61 2015 $ $ $ $ $ 52.23 31.34 101.70 18.72 11.40 2015 52.23 40.0% 20.89 31.34 101.70 6.27 25.07 PV of Horizon ROPI CAPM 11.93% Growth Rate Terminal ROPI PV of Terminal ROPI ITS Enterprise Value 10.64% Growth Rate Terminal ROPI PV of Terminal ROPI ITS Enterprise Value 13.22% Growth Rate Terminal ROPI PV of Terminal ROPI ITS Enterprise Value $ $ $ 2% 20.36 $ 130.60 $ 3% 20.56 $ 146.65 $ 4% 20.75 $ 166.75 $ 5% 20.95 $ 192.64 $ 6% 21.15 227.27 $ 204.72 $ 220.76 $ 240.86 $ 266.76 $ 301.39 $ $ 2% 21.61 $ 166.94 $ 3% 21.82 $ 190.64 $ 4% 22.04 $ 221.48 $ 5% 22.25 $ 263.25 $ 6% 22.46 323.04 $ 246.55 $ 270.25 $ 301.09 $ 342.87 $ 402.65 $ $ 2% 19.10 $ 103.59 $ 3% 19.29 $ 114.84 $ 4% 19.47 $ 128.53 $ 5% 19.66 $ 145.55 $ 6% 19.85 167.29 $ 172.46 $ 183.71 $ 197.40 $ 214.42 $ 236.16 68.87 Free Cash Flow Valuation Upside ($ in millions) 2009 Actual Revenue % Growth $ 2014 Projected 2015 Projected $ Selling, general and administrative expenses Depreciation and amortization Operating income Operating Margin $ Interest expense (income) Cash Interest Rate Earnings before taxes Tax expense (1) Net income $ Tax = $ (1) Projected tax rate @ 40% (1) Discount Rate (Rf + B(MRP)) 11.93% Income Approach 131.8 $ 3.9% 161.2 $ 22.3% 203.3 $ 26.1% 248.0 $ 22.0% 295.2 $ 19.0% 348.3 $ 18.0% 407.5 17.0% 91.4 40.4 $ 30.7% 105.1 56.1 $ 34.8% 129.0 74.3 $ 36.6% 156.3 91.77 $ 37.0% 185.9 109.21 $ 37.0% 219.4 128.86 $ 37.0% 256.7 150.77 37.0% 23.2 17.6% 0.3 16.95 $ 12.9% 28.1 17.4% 0.4 27.55 $ 17.1% 36.4 17.9% 0.5 37.44 $ 18.4% 44.1 17.8% 0.6 47.04 $ 19.0% 52.5 17.8% 0.6 56.03 $ 19.0% 62.0 17.8% 0.7 66.17 $ 19.0% 72.5 17.8% 0.7 77.50 19.0% (0.0) 0.5% 17.0 Direct costs of services Gross profit Gross margin Supplemental Items EBITDA Capex Fiscal Year Ended December 31, 2011 2012 2013 Actual Projected Projected 2010 Actual (0.0) 0.4% 27.6 (0.0) 0.3% 37.5 (0.1) 0.3% 47.1 (0.1) 0.3% 56.1 (0.1) 0.3% 66.3 (0.2) 0.3% 77.7 6.4 10.6 $ 10.3 17.2 $ 14.1 23.4 $ 18.8 28.3 $ 22.4 33.7 $ 26.5 39.8 $ 31.1 46.6 37.5% 17.26 $ 0.8 37.5% 27.95 $ 0.7 37.5% 37.94 $ 0.8 40.0% 47.62 $ 1.0 40.0% 56.67 $ 1.1 40.0% 66.87 $ 1.2 40.0% 78.24 1.3 10.64% 13.22% 2009 DCF Valuation EBIT Taxes Rate Taxes NOPAT NOA (Total Assets)-(Total Liabilities-Total Debt) Increase in NOA FCFF 2010 2011 2012 16.95 37.5% 6.35 10.59 27.55 27.55 37.5% 10.33 17.22 45.22 17.67 (0.46) 37.44 37.5% 14.04 23.40 69.08 23.86 (0.46) 2013 Projected 56.03 40.0% 22.41 33.62 100.30 16.01 17.60 47.04 40.0% 18.81 28.22 84.28 15.20 13.02 CAPM 11.93% Free Cash Flow Growth ITS Terminal Value $ 2% 271.04 $ 3% 304.36 $ 4% 346.08 $ 5% 399.85 $ $ 230.18 $ 251.41 $ 277.99 $ 312.25 $ 358.08 1.1 6.1 6.1 9.8 1.2 6.6 6.7 10.7 1.4 7.3 7.4 11.9 1.5 8.2 8.3 13.3 66.17 40.0% 26.47 39.70 118.35 18.05 21.65 6% 471.77 ITS Enterprise Value 2014 Multiple to 2011 Rev Multiple to 2011 EBITDA Multiple to 2011 EBIT Multiple to 2011 NI 10.64% Free Cash Flow Growth Post 2015 ITS Terminal Value 1.8 9.4 9.6 15.3 $ 2% 311.58 $ 3% 355.85 $ 4% 413.45 $ 5% 491.50 $ 6% 603.23 ITS Enterprise Value $ 267.26 $ 296.80 $ 335.25 $ 387.34 $ 461.92 1.3 7.0 7.1 11.4 1.5 7.8 7.9 12.7 1.6 8.8 9.0 14.3 1.9 10.2 10.3 16.5 3% 265.89 $ 4% 297.59 $ 5% 337.01 $ 6% 387.35 291.49 Multiple to 2011 Rev Multiple to 2011 EBITDA Multiple to 2011 EBIT Multiple to 2011 NI 13.22% Free Cash Flow Growth Post 2015 ITS Terminal Value $ 2% 239.83 $ ITS Enterprise Value $ 201.71 $ 217.57 $ 236.86 $ 260.85 $ 1.0 5.3 5.4 8.6 1.1 5.7 5.8 9.3 1.2 6.2 6.3 10.1 1.3 6.9 7.0 11.1 Multiple to 2011 Rev Multiple to 2011 EBITDA Multiple to 2011 EBIT Multiple to 2011 NI 2.3 12.2 12.3 19.7 1.4 7.7 7.8 12.4 Operating Income Based Valuation CAPM 2009 11.93% EBIT NOPAT NOA ROPI PV(ROPI) PV of Horizon ROPI $ $ $ EBIT NOPAT NOA ROPI PV(ROPI) PV of Horizon ROPI $ $ $ EBIT NOPAT NOA ROPI $ $ $ 16.95 $ 10.59 $ 27.55 $ $ 2009 10.64% 16.95 $ 10.59 $ 27.55 $ $ 2009 13.22% 16.95 $ 10.59 $ 27.55 $ $ 2010 27.55 17.22 45.22 13.93 2011 $ $ $ $ $ 2010 27.55 17.22 45.22 14.29 2012 $ $ $ $ $ 2011 $ $ $ $ $ 2010 27.55 17.22 45.22 13.57 37.44 23.40 69.08 18.01 18.01 37.44 23.40 69.08 18.59 18.59 37.44 23.40 69.08 17.43 2013 $ $ $ $ $ 2012 $ $ $ $ $ 2011 $ $ $ $ 47.04 28.22 84.28 19.98 17.85 47.04 28.22 84.28 20.87 18.87 47.04 28.22 84.28 19.09 2014 $ $ $ $ $ 2013 $ $ $ $ $ 2012 $ $ $ $ 56.03 33.62 100.30 23.56 21.05 56.03 33.62 100.30 24.65 20.14 56.03 33.62 100.30 22.47 2015 $ $ $ $ $ $ 2014 $ $ $ $ $ 2013 $ $ $ $ 66.17 39.70 118.35 27.74 24.79 66.17 39.70 118.35 29.04 21.44 2015 $ $ $ $ $ $ 2014 $ $ $ $ 66.17 39.70 118.35 26.45 77.50 46.50 138.47 32.38 28.93 110.63 77.50 46.50 138.47 33.91 22.63 101.68 2015 $ $ $ $ 77.50 46.50 138.47 30.85 2015 77.50 40.0% 31.00 46.50 138.47 20.12 26.38 PV(ROPI) PV of Horizon ROPI CAPM 11.93% Growth Rate Terminal ROPI PV of Terminal ROPI ITS Enterprise Value 10.64% Growth Rate Terminal ROPI PV of Terminal ROPI ITS Enterprise Value 13.22% Growth Rate Terminal ROPI PV of Terminal ROPI ITS Enterprise Value $ 17.43 $ 16.86 $ 17.53 $ $ $ 2% 33.03 $ 211.92 $ 3% 33.35 $ 237.96 $ 4% 33.68 $ 270.57 $ 5% 34.00 $ 312.59 $ 6% 34.33 368.78 $ 322.55 $ 348.59 $ 381.20 $ 423.22 $ 479.42 $ $ 2% 34.59 $ 267.16 $ 3% 34.93 $ 305.09 $ 4% 35.27 $ 354.45 $ 5% 35.61 $ 421.31 $ 6% 35.95 516.99 $ 377.80 $ 415.73 $ 465.08 $ 531.94 $ 627.62 $ $ 2% 31.47 $ 170.70 $ 3% 31.78 $ 189.23 $ 4% 32.09 $ 211.80 $ 5% 32.40 $ 239.85 $ 6% 32.70 275.67 $ 281.33 $ 299.87 $ 322.43 $ 350.48 $ 386.30 18.22 $ $ 18.78 88.82 Company Comparisons Valuation ($ in millions) Company Hudson Highland Group Inc. Kforce Inc. Randstad Holding NV Robert Half International Inc. Robert Walters plc Min Max Median Mean LTM Operating Indications Gross Profit EBITDA EBIT 352.6 20.4 13.9 339.6 61.4 48.6 3,869.3 886.3 542.7 1,429.2 272.3 220.4 276.6 27.6 24.4 Revenue 930.1 1,083.9 21,163.9 3,655.1 766.1 $ 766.1 $ $ 21,163.9 $ $ 1,083.9 $ $ 5,519.8 $ ITS $ 203.3 $ 276.6 3,869.3 352.6 1,253.4 $ $ $ $ 20.4 886.3 61.4 253.6 74.3 $ $ $ $ $ 37.9 13.9 542.7 48.6 170.0 Net Income 8.8 26.4 448.7 132.1 15.8 LTM Margins Gross Net Profit EBITDA EBIT Income 37.9% 2.2% 1.5% 0.9% 31.3% 5.7% 4.5% 2.4% 18.3% 4.2% 2.6% 2.1% 39.1% 7.4% 6.0% 3.6% 36.1% 3.6% 3.2% 2.1% 2.19% 7.45% 4.19% 4.62% 1.49% 6.03% 3.18% 3.55% 0.95% 3.61% 2.12% 2.23% 5.42% 24.21% 9.28% 12.11% 18.13% 44.94% 26.21% 28.87% 30.47% 61.92% 45.98% 46.08% 45.09% 80.65% 62.87% 62.87% 9.34% 17.30% 12.02% 13.18% 37.4 $ 23.4 36.6% 18.66% 18.42% 11.52% 24.2% 48.8% 46.32% 49.18% 33.91% Return EV/Sales EV/EBITDA EV/EBIT on Equity 0.1496 6.831 10.018 9.3% 0.4912 8.665 10.963 11.1% 0.3370 8.048 13.143 12.0% 0.9689 13.005 16.064 16.1% 0.2691 7.468 8.456 17.3% 0.318745665 2.445308486 2.958906927 3.381445966 0.1496 6.831 8.456 9.336 0.1244 6.3579 8.7700 9.7954 0.4432 8.803 11.729 13.177 0.7619 11.2485 14.6878 16.5583 0.9689 13.005 16.064 17.303 $ $ $ $ $ Debt 7.68 61.14 2,318.97 1.70 18.79 $ $ $ $ $ Cash 22.48 1.03 319.77 242.70 35.90 EV/Sales EV/EBITDA 30.42028 259.16146 25.29557 241.21509 90.09657 333.98838 154.89756 426.76168 196.97447 493.40060 497.68445 1754.52721 3122664.756 260368.9013 0.358776769 0.029914935 0.641223231 0.970085065 21% 32% EV/EBIT 316.64089 328.38506 439.17932 549.97358 601.52075 2235.69960 846.2964563 9.7235E-005 0.999902765 33% Return on Equity 644.98915 676.69659 910.29797 1143.89936 1195.36875 4571.25183 2264.79077 5319762.613 8703642.567 0.611211062 1 0.388788938 3 13% 6.502062472 5.406703248 19.25733746 33.10797167 42.10153503 105.5367001 109.4510424 146.3788714 183.3067005 200.4874215 83.58821626 87.69738261 117.9712608 148.2451391 154.9153831 ITS Valuation w/ Weights Mean ITS Valuation = 391.6065 83.80288769 77.99971931 107.9990477 137.9983761 159.5468499 Return on Equity 9.3% 11.1% 12.0% 16.1% 17.3% 18.28% 39.10% 36.10% 32.55% Multipliers: Hudson Highland Group Inc. Kforce Inc. Randstad Holding NV Robert Half International Inc. Robert Walters plc Std Deviation Min Std Dev -1 Mean Std Dev +1 Max Min Std Dev -1 Mean Std Dev +1 Max EBIT Net Income NM NM 30.5% NM 50.3% NM 41.7% 45.1% 61.9% 80.6% 8.8 448.7 26.4 126.4 Shares Stock Price Outstanding MV Equity 4.68 32.9 $ 153.97 12.46 37.9 $ 472.23 30.04 170.9 $ 5,133.84 26.45 143.0 $ 3,782.35 2.90 77.0 $ 223.30 ITS Valuation Revenues EBITDA 13.5% NM 8.2% 18.1% 9.3% 28.3% 5.4% 24.1% 24.2% 44.9% $ $ $ $ Equity Value: Hudson Highland Group Inc. Kforce Inc. Randstad Holding NV Robert Half International Inc. Robert Walters plc Min Std Dev -1 Mean Std Dev +1 Max Sum (min:max) (Sum-Avg)^2 % of Sum of Row 49 1 - Row 50 Weight of Row 51 to Sum 2-Year Compound Annual Growth Rate 279.4299 280.5548 391.6065 502.6582 557.0512 Enterprise Value $ 139.17 $ 532.35 $ 7,133.03 $ 3,541.35 $ 206.19 780666.19 65092.225 211.57411 1329940.7 Comparable Transactions ($ in millions) Transaction 1 2 3 4 5 6 7 8 9 10 11 Standard Deviation Low High Median Mean Valuations EV/Revenue Revenue Implied Enterprise Value Weight EV/EBITDA EBITDA Implied Enterprise Value Weight Enterprise Value Target Revenues Enterprise Value 732.22 153.65 1157.86 83.50 162.44 71.79 128.60 1824.29 44.47 55.28 840.75 $ $ $ $ Low 44.5 1,824.3 153.7 477.7 EBITDA 2088.95 623.34 1742.60 806.79 1163.43 135.95 603.30 579.76 51.06 67.77 372.97 $ $ $ $ Mean 51.1 2,089.0 603.3 748.7 EV/Revenue EV/EBITDA EBITDA Margin 71.95 17.15 58.84 5.57 27.13 12.10 20.69 86.38 3.75 4.19 53.21 $ $ $ $ High 0.35 0.25 0.66 0.10 0.14 0.53 0.21 3.15 0.87 0.82 2.25 3.8 0.103496573 86.4 3.14662964 20.7 0.528061787 32.8 0.848478988 0.1034965728 203.3 21.040853258 0.4 5.3442190711 37.9393 202.7559306033 0.6 0.8484789883 203.3 172.4957783292 0.5 12.1739215513 37.9393 461.8700619117 0.5 3.1466296399 203.3 639.7098057817 0.4 21.1193563325 37.9393 801.253595705 0.6 130.0698996651 317.1829201205 736.6360797357 EV/EBITDA 3.428368464 8.3602733872 19.4161747775 EV/Revenue 0.6397929152 1.5601717665 3.6233943912 10.18 8.96 19.68 14.99 5.99 5.93 6.22 21.12 11.86 13.19 15.80 5.344219071 5.344219071 21.11935633 11.85866667 12.17392155 3.44% 2.75% 3.38% 0.69% 2.33% 8.90% 3.43% 14.90% 7.34% 6.18% 14.27% 0.69% 14.90% 3.44% 6.15% Offers ($ in millions) StaffCo Purchase Cash StaffCo Equity 100% 220 140 Total Offer Corporate Value Based on Offer 360 360 HGE % 2013 EBITDA Estimate Purchase Cash Term Loan Senior Term Loan Subordinate Cash Offer 100 40% 95 60 20 15 Debt = 80 95 92.5 90 87.5 85 95 60 20 12.5 95 60 20 10 95 60 20 7.5 95 60 20 5 95 60 20 2.5 95 60 20 0 190 475 Total Offer Corporate Value Based on Offer 97.5 187.5 468.75 185 462.5 182.5 456.25 180 450 177.5 443.75 175 437.5 Owner's Share 48 142 355 139.5 348.75 137 342.5 134.5 336.25 132 330 129.5 323.75 127 317.5 Earnout Vesting Schedule ($ in millions) % of Management 2013 EBITDA Estimate Implied 2013 EBITDA Achieved $ Value Low Mid 2013 100.0% 97.5% Low Projection 95.0% 92.5% 90.0% 87.5% 85.0% $46.0 $44.9 $ $15.0 2013 Projected Projected $12.5 44.09 $10 $43.7 $42.6 $5.0 $2.5 $0.0 $ $ 254.8 $ 9.0% 259.9 10.2% 164.6 90.21 $ 35.4% 166.6 93.3 35.9% 46.1 18.1% $10.0 $7.5 $41.4 $40.3 $39.1 $ 47.3 18.2% 0.7 43.39 $ 17.0% 0.6 45.36 17.5% (0.1) 0.3% 43.5 (0.1) 0.3% 45.4 $ 17.4 26.1 $ 18.2 27.3 $ 44.09 $ 40.0% 1.2 40.0% 46.0 1.1 New WACC After H G E Buyout ($ in millions) 2011 Actual 2012 Low 15% Growth Rate CURRENT ASSETS Cash and cash equivalents Accounts receivable, net Other current assets Total current assets $ LONG-TERM ASSETS Fixed assets, net Goodwill Other assets Total long-term assets 36.6 34.2 3.7 74.5 $ 2.3 0.6 2.9 Total assets 19% 19% 42.12 39.29 4.31 85.72 2012 Mid 16% 2.70 78.38 0.75 81.83 42.49 39.63 4.35 86.46 44.32 41.34 4.54 90.19 2.70 78.39 0.75 81.84 $ 2012 High 21% 2.70 78.44 0.75 81.89 $ $ 167.55 $ 168.31 $ 172.08 $ CURRENT LIABILITIES Accounts payable Accrued expenses Accrued payroll Total current liabilities 77.4 3.0 0.7 4.3 8.1 $ 3.49 0.84 4.97 9.30 $ 3.52 0.84 5.02 9.38 $ 3.68 0.88 5.23 9.79 LONG-TERM LIABILITIES Term Loan (LIBOR + 7) Subordinate Loan (2% PIK) Other liabilities Total long-term liabilities 0.3 0.3 60.00 20.40 0.29 80.70 11% 60.00 20.40 0.29 80.70 ### ### 0.29 80.70 90.48 Total liabilities $ 8.4 90.00 90.08 Shareholders' equity $ 59.1 77.55 78.23 $ 81.60 Total liabilities & shareholders' equity $ 67.4 168.31 $ 172.08 $ 167.55 $ 169.571161 167.55 (2.02) 170.3165483 168.3064069 (2.01) 174.043483 172.082716 (1.96) D/E 1-Tax 1.16049395 60% 1.1515238 60% 1.10889704 60% Levered Beta 2.19093639 2.183984884 2.15095085 CAPM 17.10% 17.06% 16.87% 5.93% 47.99% 52.01% 5.93% 47.77% 52.23% 5.93% 46.72% 53.28% 11.736% 11.740% 11.755% Change in Goodwill Tax Rate RFR Equity Risk Premium Unlevered Beta CAPM 40% 4.50% 5.75% 1.29 11.93% Term Loan (LIBOR + 7) 8.50% Subordinate Loan (2% PIK) 14% Cost (D) D/V E/V WACC 0.75 0.25 1 Month LIBOR Rate 3 Month LIBOR Rate 6 Month LIBOR Rate 1 Year LIBOR Rate 0.28 0.56 0.79 1.11