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Dupont Corporation Case Questions

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Avinash Kumar
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122 views1 page

Dupont Corporation Case Questions

Uploaded by

Avinash Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Dupont Corporation Case Questions:

1. Assess DPC’s fit within Dupont? What are its prospects going forward as a division within
DuPont versus its potential value to an outside party?
2. How attractive is DPC as an acquisition from a strategic buyer’s or PE firm’s perspective?
What are the potential risks to such a deal?
3. What are some of the important features of APV, and why is it a useful approach for
valuing an LBO?
4. Working from case Exhibit 9, relative to the stand-alone value, estimate the dollar
increase in DPC’s value if a PE fund can obtain:
a. 5% revenue growth per annum (versus 4% growth) in each of the next five years
and improve the operating margin to 12% (versus 10%).
b. Assume part a and that the division can be sold at 7.5 x EBITDA in five years.
c. Assume part a and part b and that debt financing equal to 6.0 x forward EBITDA
can be obtained. Assume that all cash available to pay debt each year (i.e., residual
cash flow) is used to pay down the LBO debt and that, after five years, the firm
revert to an all-equity firm.
d. What are some of the advantage and risks of using leverage to finance the
investment?
5. If a PE sponsor has a target return of 20% on its funds (equity contribution), what is the
maximum enterprise value it can offer for DPC for part b and c above?
6. What minimum bid should Ellen Kullman set if she chooses to sell DPC?

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