Baird Investment Banking Pitch Book
1 AM WEIGHTED AVERAGE COST OF CAPITAL ANALYSIS
($ in millions)
(1)
(2)
(3)
Cost of
Equity
(5)
(6)
(7)
Cost of
Debt
Cost of Capital Components
Risk-free Interest Rate a
Levered Beta
Market Premium (3)
Size Premium
Cost of Equity (5
(5)
Revolving Credit Facility
5.375% Senior Notes Due 2024
Cost of Debt
Amount
Outstanding (6)
$770
650
$1,420
3.3%
1.43
6.9%
0.9%
14.1%
Interest
(3)
Rate
3.3%
5.2%
4.2%
Freliminary Draft
Implied Weighted Average Cost of Capital (“WACC”)
AM Market Value of Equity
AM Net Debt Outstanding
Total AM Firm Value
AM Equity Market Value / Firm Value
x Cost of Equity
Cost of Equity Contribution
AM Net Debt / Firm Value
x Cost of Debt
Cost of Debt Contribution
Total Implied WACC
Source: AM filings and Bloomberg.
Represents estimated 20-year treasury rate as of October 5, 2018.
Represents two-year levered equity beta as of February 23, 2018, the date prior to the announcement of the Special Committee Formation.
Large company stock total returns minus long-term government bond income returns as computed by Duff & Phelps LLC.
Source: Duff & Phelps LLC size premium based on AM's equity market value as of October 5, 2018.
+
Cost of equity is calculated using CAPM (e.g. cost of equity risk-free interest rate levered equity beta market risk premium size premium).
Represents current debt outstanding, per most recently disclosed June 30, 2018 10-0
Interest rate for publicly traded senior notes represents the yield to worst as of October 5, 2018. Interest rate for revolver represents effective rate per 6/30/18 10-Q
BAIRD
$5,562
1,400
$6,963
79.9%
14.1%
11.2%
20.1%
4.2%
0.8%
12.1%
As a result of its weighted average cost of capital
analysis, Baird utilized a range of 11.0 % -13.0 % for
purposes of its discounted cash flow analysis herein
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