1) How does Berkshire create value? In what other ways do PE firms create value?
2) Does Carters fit with the Berkshire investment philosophy? Why is Investcorp selling?
3)Assume the deal closes on 12/31/01 and assume the company’s 2001 plan was achieved. Build a financial model for Carters (proforma income statement, balance sheet and cash flow statement) – how much debt does Carters pay back in the five year forecast period (2002-2006) based on management’s forecast?
4) Do a traditional DCF Valuation. What WACC would you use? Do a Capital Cash Flow Valuation. What WACC would you use? What assumptions if any did you have to make? (I will put a note on Capital Cash Flows on the HBS site for those who need it)
5) How realistic are the forecasts? Adjust your financial model to reflect a case you believe to be realistic. What is the terminal debt and terminal value in this case?
6) What should Berkshire bid?
7) If you were to adjust the management plan and assume that only a certain same percentage of the sales plan was achieved in each of the years of the forecast, what would this percentage be in order to still achieve a 23% return on investment for Berkshire if Berkshire were to pay $130MM plus the $317MM of debt?
8) How will the staple on financing impact the range of bids likely to be submitted for the company? If the Term Loan provided by Goldman Sachs were to increase from $125MM to $160MM how might this impact Berkshire’s bid for Carters
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