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Nabisco 1. Valuation: See attached (Note: done in accord with valuation of LBO Inc. in the course packet, page 13, Exhibit 1 in A Note to Capital Cash rise Valuation) The first task is to determine the free specie flow. Its given to us in the case and is the fare of funds that the firm gutter payout to investors after making in all investments. Simply defined as: FCF=EBIT(1-t)+Depreciation-Capex-NWC From that we put forward add the intimacy expense and that gives us the capital cash flow. instantly we beget to that determined, we collect to focus on queue uping the discount yard, r, that we deal to discount the cash flows. This is done one of two shipway through the weighted cost of capital, where we have to look at the capital structure of the firms. For for Nabisco this can be a atomic challenging because the capital structure changes and we would need to recalculate WACC all time. To avoid this problem we can use CAPM: Ra=rf+?a(rm-rf) We know the risk free rate=9%, and we can assume that risk premium=~6% because in about cases the premium is usually less than the risk free rate. Now we have to determine the asset beta. Where ?a=?d(D/V) + ?e(E/V). We know that Nabisco is non highly levered and so we can assume that ?d=0, we need beta of the asset is just a function of assess of equity times it beta. ?a=.

67*(6038/((3884+6038))=.41 So we have all the components that we need to calculate discount rate: Ra=9%+.41(6%)= 11.5% Now we can find the present value of the cash flows using the 11.5% discount rate. For the valuation we also need to find the terminal value: Assuming a growth rate of 5% per year. See attached for valuation and sensitivity analysis under pre-bid, management, and KKR strategies. 2. The values of the three strategies are different collectable to the different cash flows used to evaluate the present value. apiece strategy had a different cash flow open for capital payments. The decisions made by the management of the firm can influence the cash... If you want to get a full essay, coordinate it on our website: Ordercustompaper.com

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