On May19, 2005, Maytag Corporation (MYG), the home appliance manufacturer, agreed to be acquired by Ripple wood Holdings for $1.13 billion in cash or $14 per share, a 21 percent premium over the closing price of $11.56 the day before.

Maytag is a manufacturer of washing machines, dryers, dishwashers, and other home appliances, including the venerable Hoover vacuum cleaner, Besides Maytag and Hoover, its brands include Jean-Air and Amana. The company traces its roots back to 1893 when F. L. Maytag started manufacturing farm implements, producing his first wooden-tub washing machine in 1907 from which evolved the appliance now seen as a household necessity. Ripple wood is a private equity firm famous for its investments in depressed Japanese firms in the 1990s.

However, to get a handle on the issue, you must download the 2004 l0-K from the SEC EDGAR Web site and go into the details. The 2004 financial statements are also on the Web site for this chapter. To initialize the pro forma, reformulate the income statement and balance sheet for 2004. Then begin your fore casting, line by line, for a "best guess" scenario.

Investigate the, sensitivity of your valuation to changes in forecasts and see if you can justify the $14 price the $21 price-as falling within the range of feasible scenarios. Use a required return on operations of 10 percent, the minimum that a private equity investor would require.

Postscript: On August 22, 2005, Maytag's board agreed to the Whirlpool offer and paid Ripple wood a $40 million fee for breaking the agreement.