Why does Herbert Kohler want to do the recap? Why does he want to buy the

minority shareholders out when he already controls about 90% of the company?

2.

What do the minority shareholders want? Why are they bothering Herbert

Kohler?

3.

What is the total enterprise value of Kohler Co. using a discounted cash flow

approach? What is the enterprise value using a multiples approach? What is the

value of a share held by a minority shareholder in Kohler Co. that is implied by

your valuations?

4.

What assumptions can you use to arrive approximately at the share price of

$55,400 that was estimated by Kohler Co.? Show how these assumptions can

impact your valuation.

5.

What assumptions can you use to arrive approximately at the share price of

$273,000 that was estimated by dissenting shareholders? Show how these

assumptions impact your valuation.

6.

What is the maximum share price at which Herbert Kohler should be willing to

settle with the dissenting shareholders in order to stop the trial on April 11,2000?

Assume that (i) if the trial proceeds, it is expected to last less than a month and to

result in one of two possible outcomes in terms of the price per share established

in court: the $273,000 being claimed by the plaintiffs, or the $55,400 being

defended by Herbert Kohler; (ii) Kohler estimates the probabilities of these two

outcomes at 30% and 70%, respectively.

7.

How would your answer to the previous question change if you also assume that

(i) the inheritance tax owed on Frederic Kohlers estate was 50.2% of his holdings

in Kohler Co. (equivalent to 489 shares out of the 975 he owned); (ii) the taxes

paid by the estate amounted to $27 million (489 shares at $55,400 each), (iii) were

the settlement or the trial to result in a revised share price in excess of $55,400,

the IRS would likely demand a similar valuation for its claim on Frederics estate;

and (iv) Herbert Kohler estimates the probability of the IRSs demand at 100% if

he goes to trial and 50% if he settles.

For the last two questions, assume legal fees can be ignored and Herbert

Kohler, the dissenters and the IRS all have the same cost of capital. Assume any

interest charges are offset by the value for Herbert Kohler of paying late.