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FNCE100 Corporate Finance

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Read the case study on DuPont Case and The questions below ask you to value DuPont as a conglomerate versus the value in the sum of its parts (i.e., the total value of the divisions if they were split up and operated as separate companies). Among other things, this exercise involves deducing value by comparing each division to similar (i.e., comparable) firms. Objectives/Questions Detailed instructions provided below:

1. Do you agree with the comparable firms chosen for the Agriculture Division in Exhibit 4? Would you delete any of the given comparable firms from your analysis? If so, why?

Use the companies given in Exhibit 4 for your analysis of questions 2-8. In question 9, you may comment on how your analysis and conclusions change (or not) if you were to change the list of comparable companies.

2. Use SEC Filings or Capital IQ1 to gather information of comparable companies to begin a valuation of DuPont and its parts (Detailed instructions appear below in the Information Gathering section). Enter the most recent data as of December 20142 for Shares Outstanding, Cash, Short Term Investments, Short Term Debt (include current portion of Long Term Debt), Long Term Debt (include capital leases), and Shareholder’s Equity in the blank spaces within Exhibit 4. Use these data to calculate Market Capitalization, Adjusted Cash, Total Debt, and Enterprise Value for these divisions in Exhibit 4.
3. Use the company information provided and gathered for question 2, combined with consensus estimates provided in Exhibits 5 and 6, to calculate Price/Earnings, Enterprise Value/EBITDA, Enterprise Value/Sales, Price/Book Value ratios, and EBITDA margins for all companies for the years 2013-2017. Enter these calculations into Exhibits 7 and 8.
4. For each of the following entities (DuPont Corporate, Agriculture, Electronics & Communications, Industrial Biosciences, Nutrition & Health, Performance Chemicals, Performance Materials, and Safety and Protection), calculate mean and median values for all ratios in all years considered in question 3. Record these calculations in Exhibits 7 and 8.
5. Use DuPont’s 2014 10-K report (some of the needed data can be found through Capital IQ, but to get all the needed information, use the 10-K) to gather information on the revenue, operating profit, and assets attributable to each division to facilitate a sum of the parts valuation and enter these data into Exhibit 9.
6.Use the template in Exhibit 10 to create “common-size” measures for all of the data gathered in Exhibit 9. This should allow you to determine what percentage of revenue, operating profit, etc. each division contributes to the whole.
7. Value DuPont Corporate and each of its divisions. Use the 2015 EV/EBITDA Ratio to value all of the divisions and DuPont Corporate using the template laid out in Exhibit 11.
8. Sum the values of each of the divisions to impute a “sum of the parts” value of DuPont, and compare this to your estimate of DuPont’s calculated share price to determine whether DuPont is worth more “Dead or Alive”.
9. Using your analysis in question 8 and other assumptions, which division(s) if any would you recommend that DuPont attempt to divest? Given your view, what do you think of the DowDuPont plan to break the combined Dow+DuPont into three separate companies (you have to find information about DowDuPont on your own)? Explain your strategic thinking.
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