Why is USG a takeover target? Has Robert Day done a good job managing USG since becoming CEO in June 1985? 2. How should Day respond to Desert Partners tender offer? Is the proposed recapitalization the best response? Is USG Corporation a good candidate for a leveraged recapitalization? 3. As a shareholder, would you tender your shares to Desert Partners for $42 per share or wait and vote for the proposed recapitalization? What is the value per share of the leveraged recapitalization including the stub value? Use the Capital Cash Flow Method of DCF valuation and the Method of Multiples. Assume (i) debt beta of 0.10, (ii) market risk premium of 7.5%, (iii) terminal growth rate of 5.0%, (iv) book value of debt approximately equal to its market value, (v) average stock price of $35.0 over the pre-recap estimation period. 4. What are the specific issues that make this valuation complicated? Is your valuation by discounted cash flow consistent with your valuation by multiples? Why or why not? 5. As Desert Partners, how would you respond to the proposed recapitalization plan? Would you increase or reiterate your $42 per share offer? Would you extend the expiration date?