Mini Case 4. In September 2018, ODB Partners Fund III is considering a leveraged buyout of Fair Dark, a small manufacturer of high end digital music equipment. Fair Dark is located in Paris, France, but the majority of its sales come from professional musicians and recording studios in North America, Asia and Europe. If the two parties can agree on a purchase price, the deal would close near the end of 2018. All currency values in this problem are reported in so that currency conversion should not be required. Historical Performance The following table gives some information that ODB has collected about the historical per- formance of FairDark leading up to the deal including their estimate of 2018's full year results (2018E). Year 2015 2016 2017 2018E Revenue Gross Profit EBITDA EBIT Income Capital Expenditures Increase in Working Capital 11.7 3.2 1.7 1.4 0.98 0.1 0.2 15.6 5.1 3.3 2.9 2.03 1.5 -0.5 30.0 11.4 8.1 7.7 5.39 0.1 1.8 37.3 15.3 10.9 10.7 .49 0.4 0.6 (values in millions ) Projected Future Performance ODB has identified several operational improvements it believes will increase the the growth rate of Fair Dark. The projected financial performance of Fair Dark for each year following the deal under the assumptions that the operational changes are successful: Projected Cash Flows 2019 2020 2021 2022 2023 Year Revenue Gross Profit EBITDA EBIT Capital Expenditures Increase in Working Capital 50.5 18.9 14.7 14.4 0.5 1.4 56.0 21.0 16.3 16.0 0.5 0.5 60.9 22.8 17.7 17.3 0.5 0.5 64.8 24.1 18.8 18.3 0.5 0.5 69.1 25.7 19.9 19.4 0.5 0.3 (values in millions ) Fair Dark's historical effective tax rate is 31%, and is expected to remain 31% in the future