Microsoft Word - Guidelines for Palamon Capital Case FIN 4596 Spring 2019 Guidelines for work in Palamon Capital Case Palamon Capital is a UK-based private equity fund who faces the decision whether...

I need help with calculations on excel and a little explanations


Microsoft Word - Guidelines for Palamon Capital Case FIN 4596 Spring 2019 Guidelines for work in Palamon Capital Case Palamon Capital is a UK-based private equity fund who faces the decision whether to invest in an Italian software company. Out task is to evaluate the attractiveness of the investment, a valuation of the target with its new capitalization, and an assessment of the proposed structure. Each team will use the data in the case file and the attached spreadsheet to answer the following in the Executive Summary: 1. Talk about your research findings on the Private Equity investing/market (one page, 12 fonts, double-space and normal margins). E.g., Introduce the practice, goals and process of private equity investing; Compare PE investing attributes with public market investing; Discuss the diffusion of PE investing practice around the world; Or how important are exit strategies in the PE market? This part of summary is general information on PE and should not refer to the Palamon case. On second and third page, discuss answers to the following questions (#2-6). The answers to #2- 5 should be very short and please focus your discussion on #6. Submit your Excel worksheet as a separate file as well: 2. What is the equity value of Team Sport using the FCFs and cost of capital (14%) given in the case? [Note: You need to first find the TV using the perpetuity method and the given FCFs, g, and r, then find the PV of all the CFs to estimate Firm Value. Equity Value is the difference between this Firm Value and Debt (given in case as ITL46 billion in Exhibit 9.) 3. Suppose that comparable firms have a market value debt/equity ratio of 30% and are taxed at the similar rate as Team Sport. What is the unlevered beta for Team Sport? 4. Compute an unlevered cost of equity for Team Sport using the 10-year Italian government bond rate and a market risk premium = 8%. Use this discount rate to re-compute the value of the free cash flows. 5. Compute the annual interest tax shield based on the debt outstanding, tax rate, and cost of debt capital, ALL of which are given in the case. Then find the present value of this finite series of annual Tax Shields. 6. Add your answers in #4 and #5 to find the Adjusted Present Value (APV) of the firm. Find the Equity Value using the same approach as in #2 above. How does this Equity Value compare to your answer in #2? WHY is it different? How does this Equity Value help the PE investor optimize their offer and deal structure? Team Presentations Two Groups will present their findings for Palamon case. Please start the presentation by sharing with us the most interesting facts you discovered about the Private Equity investing/market, and then explain how the APV method helps the PE investor optimize their offer and deal structure. Remember to introduce each member, have each member present, be prepared to answer questions, and limit your presentation to 20 minutes. Remember to address your points to the assumed Board of directors in the PE firm, make eye contact, and do not simply read the slide, but communicate your points clearly to the audience. PRACTICE!!!