Baird Investment Banking Pitch Book
EARN-OUT DISCOUNT ANALYSIS
COST OF CAPITAL ANALYSIS (¹)
12.0%
Based on its risk characteristics, the earn-out payment should be priced along the cost of capital continuum for AR and AM
From AR's perspective, a reasonable "Upper Bound" would be equivalent to its implied cost of equity, especially considering its
most likely use of proceeds will be to support a potential share buy-back program
From AM's perspective, a reasonable "Lower Bound" would be equivalent to its overall weighted average cost of capital
PV OF EARN-OUT PAYMENT ($MM) (2)
Implied
Discount
Rate
Payment
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Cost of Debt
11.0%
9.0%
4.4%
Cost of Equity
Antero
WACC
9.0%
8.0%
| Papa a ma ka ma na m
Source: Management Base Case projections as March 23, 2017.
(1) Based on AR and AM cost of capital analyses (see Appendix for detail)
(2) Assumes a present value date of May 1, 2018
4.0%
Antero
Midstreamtare un
Upper Bound
}
Lower Bound
12.0%
11.0%
10.5%
*****
10.0%
9.5%
9.0%
8.5%
8.0%
7.5%
7.0%
Confidential
$196
$200
$202
$203
$205
$208
$210
$212
$214
$216
BAIRD
Project Bronco
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