LBO Analysis of DuPont Performance Coatings (DPC) This exam is adapted from the DuPont Corporation: Sale...

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LBO Analysis of DuPont Performance Coatings (DPC) This exam is adapted from the DuPont Corporation: Sale of Performance Coatings case. Given the following information on DPC and LBO terms, compute the IRR and cash-on-cash return to an LBO sponsor. Make sure your work is legible. 2011 DPC Revenue and EBITDA were: ($millions) 2011 Net Sales $4,500 EBITDA $425 Base your DPC forecasts for 2012-2016 on the following assumptions: Forecast Assumptions 2012 2013 2014 2015 2016 Revenue Growth 4.0% 4.0% 4.0% 4.0% Depreciation % Revenue EBIT Margin Capex % Revenue Net working capital % Revenue 2.5% 2.5% 2.5% 2.5% 2.5% 11% 11% 11% 11% 11% 2.5% 2.5% 2.5% 2.5% 2.5% 15% 15% 15% 15% 15% Assume the LBO is financed with 60% debt at a debt multiple of 6.0x 2011 EBITDA. The cost of debt = 6.5%. Tax rate = 25%. Available cash flow each year is applied to reducing the amount of debt. Assume exit at the end of 2016 at a multiple of 9x 2016 EBITDA. Answer Rate of Return Analysis IRR 26.7% Cash-on-Cash 3.3x LBO Analysis of DuPont Performance Coatings (DPC) This exam is adapted from the DuPont Corporation: Sale of Performance Coatings case. Given the following information on DPC and LBO terms, compute the IRR and cash-on-cash return to an LBO sponsor. Make sure your work is legible. 2011 DPC Revenue and EBITDA were: ($millions) 2011 Net Sales $4,500 EBITDA $425 Base your DPC forecasts for 2012-2016 on the following assumptions: Forecast Assumptions 2012 2013 2014 2015 2016 Revenue Growth 4.0% 4.0% 4.0% 4.0% Depreciation % Revenue EBIT Margin Capex % Revenue Net working capital % Revenue 2.5% 2.5% 2.5% 2.5% 2.5% 11% 11% 11% 11% 11% 2.5% 2.5% 2.5% 2.5% 2.5% 15% 15% 15% 15% 15% Assume the LBO is financed with 60% debt at a debt multiple of 6.0x 2011 EBITDA. The cost of debt = 6.5%. Tax rate = 25%. Available cash flow each year is applied to reducing the amount of debt. Assume exit at the end of 2016 at a multiple of 9x 2016 EBITDA. Answer Rate of Return Analysis IRR 26.7% Cash-on-Cash 3.3x