ASSIGNMENT for BW/IP 1. Examine the leveraged buyout that created BW/IP International, Inc. Was this business a good candidate for an LBO? Why (not)? 2. Evaluate the equity in the original BW/IP LBO using the Equity Cash Flow methodology. Assume an asset beta of 1.0 and debt betas of 0.0. Assume a risk free rate 9.21% (Exhibit 7) and a risk premium 5%. What is the NPV of this investment? 3. How does the analysis change if we consider non-zero debt betas? How does the concluded value change? 4. Do you favor the proposed acquisition of UCP? What are the primary sources of value in such a transaction? Is the proposed price reasonable? 5. How do the various features of the BW/IP buyout affect the company's decisions about long-horizon opportunities such as UCP acquisition? What are the advantages and disadvantages of the 1987 buyout, viewed as a financial program