You will select a firm/stock and perform a Valuation Analysis. Select a public c

Question

You will select a firm/stock and perform a Valuation Analysis. Select a public company that you find interesting. Assess the value of this firm by completing the following:

1. (Write 1-2 paragraphs) Make some qualitative assumptions about the business by performing some research on the Internet. Learn about the company, industry, market share trends, end market growth rates, expected growth rates, profitability levels and trends, business drivers, risks, competition, etc.). Write 1-2 paragraphs on these findings.

2. Estimate the firm%u2019s Weighted Average Cost of Capital.

3. Calculate the present value of the firm using the Dividend Discount Model methodology. You will need to look up the current annual dividend and also the expected dividend growth.

3. Calculate the present value of the firm using the Operating Free Cash Flow Model methodology. You will need to estimate the expected cash flows for each of the next 5 years and also the terminal value.

4. (Write 1 paragraph) Compare your results to the current stock price. What is your conclusion and why?

Explanation / Answer

OVERVIEW

The Debtors have been advised by The Blackstone Group ( Blackstone ) with respect to the value of the Reorganized Debtors. Blackstone has undertaken this valuation analysis

( Valuation Analysis ) for the purpose of estimating value available for distribution to creditors pursuant to the Plan and to analyze the relative recoveries to creditors thereunder. The Valuation Analysis has also been undertaken for the purpose of evaluating whether the Plan meets the so-called best interests test under section 1129(a)(7) of the Bankruptcy Code. This Valuation Analysis should be read in conjunction with the Plan and the Disclosure Statement. Blackstone developed a valuation for the consolidated Reorganized Debtors (the Consolidated Valuation ) based on the Financial Projections provided in Appendix D of the Disclosure Statement ( Financial Projections ). The adjusted enterprise value2

of the consolidated Reorganized Debtors (the Consolidated Adjusted Enterprise Value ) is estimated to range

from approximately $18,200 million to $20,800 million. This estimated Consolidated Adjusted Enterprise Value range assumes an Effective Date of April 30, 2007 and reflects the going

concern value of the Reorganized Debtors after giving effect to the implementation of the Plan.3 The common equity value of the consolidated Reorganized Debtors (the Consolidated Equity Value ) is estimated to range from approximately $9,400 million to $12,000 million. The Consolidated Equity Value range reflects the difference between the Consolidated Adjusted Enterprise Value and the total amount of net debt4

that is estimated to be outstanding at the Effective Date after giving effect to the Plan. With respect to the Financial Projections, Blackstone assumed that such projections have been

reasonably prepared on the basis of bes

is of best currently available estimates and good faith judgments of the Debtors as to the future operating and financial performance of the Reorganized Debtors. The Consolidated Valuation is based on numerous qualifications and contingencies, including

but not limited to: (i) the Debtors ability to achieve all aspects of the Financial Projections, (ii)

the state of the capital and credit markets as of the Effective Date, (iii) Debtors ability to raise

and maintain sufficient capital to implement the business plan on which the Financial

VALUATION METHODOLOGY

The following is a brief summary of the financial analyses performed by Blackstone to arrive at

its estimated Consolidated Valuation of the Reorganized Debtors. Blackstone relied primarily

on the comparable company analysis ( Comparable Company Analysis ) and the discounted

cash flow analysis ( Discounted Cash Flow Analysis ), which were weighted 40% and 60%, respectively, in the calculation of Consolidated Adjusted Enterprise Value. The rationale for weighting the Discounted Cash Flow Analysis more as compared to the Comparable Company Analysis is that the Discounted Cash Flow Analysis captures the forecasted improvement in

operating cash flow and EBITDAR

1

beyond 2007, which is not captured in the Comparable Company Analysis. Blackstone completed the financial analyses described below, and reviewed the assumptions with the management of the Debtors on which such analyses were based and other factors, including the projected financial results of the Reorganized Debtors. Blackstone s estimated

valuation must be considered as a whole and selecting just one methodology or portions of the

analysis, without considering the analysis as a whole, could create a misleading or incomplete

RECOVERIES As described above, Blackstone estimates the pro forma Consolidated Equity Value to be $9,400 million to $12,000 million. These estimates reflect the range of Consolidated Adjusted5

Enterprise Values as described above and the assumed pro forma capital structure as described

herein. Based on these Consolidated Equity Value estimates and an estimated consolidated pool of Unsecured Claims for the Debtors of $15 billion, Blackstone estimates the recovery to the holders of consolidated Debtors Unsecured Claims to be 63% to 80%. These recoveries do not

take into account any dilution or other financial effects that may occur pursuant to

implementation of the Compensation Programs.

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