1. Is Mercury an appropriate target for AGI? Why or why not?

2. Review the projections formulated by Liedtke. Are they appropriate? How would you recommend modifying them?

3. Estimate the Value of Mercury using a discounted cash flow approach and the base projections.

Diagram 2: Free Cash Flows

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2007 2008 2009 2010 2011 Revenue $479,329 $423,837 $489,028 $427,333 $532,137 $465,110 $570,319 $498,535 S597,717 S522,522 Operating Expenses Corporate Overhead Less: $8,487 $10,098 S10,583 Less: S8,659 $9,422 $47,005 S18,802 $64,612 S53,036 $21,214 EBIT $57,605 $23,042 S61,686 $24,674 Less: Taxes (EBIT*40% tax rate) $25,845 $34,563 $10,643 $13,303 $38,767 $11,954 $14,943 $28,203 $9,587 S11,983 S31,822 $9,781 S12,226 $37,012 S11,406 $14,258 Add: Depreciation Capital Expenditures Less: $2,648 $9,805 $4,569 $8,687 Less: Increase in Net Working Capital Free Cash $6,234 $21,238 $26,728 S22,097 $29,544 $25,473 Flows