Arzac Valuation Mergers, Buyouts and Restructuring, 2nd Edition By ENRIQUE R. ARZAC
Email: Richard@qwconsultancy.com
Instructor’s Manual to Accompany
VALUATION FOR MERGERS, BUYOUTS, AND RESTRUCTURING Second Edition
Enrique R. Arzac Graduate School of Business Columbia University
Copyright © 2008 John Wiley & Sons, Inc. All rights reserved.
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Preface This manual contains solutions to all end-of-chapter problems in Valuation for Mergers, Buyouts and Restructuring, 2nd edition. The number of problems and their nature varies from chapter to chapter depending on the author’s estimate of the students’ need for reinforcement. All the problems can be solved using a readily available spreadsheet program such as MS Excel. The Valuation Aids CD-ROM included with the text contains a number of Excel spreadsheets with models for solving the most computation intensive problems; it also includes a folder with Excel spreadsheets for many of the exhibits included in the textbook and in this manual. A separate folder “Excel Files” is included with this manual contains spreadsheet models for the problems numbered in italics. The folder “Power Point Slides” contains presentation slides that complement the material covered in the text. In Chapter 1 of this manual I have provided a guide to alternative study paths through the textbook, depending on the purpose of the course and the background of its students. Chapters 2 to 15 and Appendix A contain the answers to the problems. I have also interspersed comments about the use of the Valuation Aids software. A companion folder contains spreadsheets with solutions to most of the problems. I have done my best to eliminate mistakes and ambiguities from the textbook and this manual, but some undoubtedly remain. I would very much appreciate any suggestions for improvements, criticisms and corrections. My addresses are: Professor Enrique R. Arzac 623 Uris Hall Graduate School of Business Columbia University New York, NY 10027 USA email: era1@columbia.edu
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Table of Contents
Part I. The Tools of Valuation Chapter 1. A User’s Guide
1
Chapter 2. Forecasting and Valuation of Free Cash Flows
4
Chapter 3. The Equity Premium and the Cost of Capital
14
Chapter 4. Metrics and Multiples
17
Chapter 5. Economic Value Added
19
Chapter 6. Valuation with Changing Capital Structure
23
Chapter 7. Debt Capacity for Acquisition Financing
27
Chapter 8. Valuing Entry and Exit Options
29
Part II: Mergers, Acquisitions and Buyouts Chapter 9. Merger and Acquisitions
34
Chapter 10. Deal making with Difference of Opinion
45
Chapter 11. Special Offer Structures: Price Guarantees and Collars
55
Chapter 12. Acquisitions in Developed and Emerging Markets
59
Chapter 13. Leveraged Buyouts
65
Part III: Recapitalizations and Restructuring Chapter 14. Recapitalization of Troubled Companies
74
Chapter 15. Asset Restructuring
80
Appendix A. Financial Options
84
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