BTR Dunlop Holdings, Inc. - Page 28




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               In estimating expenditures, Gooch analyzed historic                    
          royalties, capital expenditures, and overhead and had some                  
          discussions with Schlegel UK management.  Gooch determined from             
          this analysis that the royalty rate for the automotive group was            
          3 percent of sales, that the royalty rate for the building                  
          products group was 3.2 percent of sales, and that capital                   
          expenditures should be 4.5 percent and 2.3 percent for the                  
          automotive and building products divisions, respectively.  He               
          also calculated a terminal value of $47.648 million.  Applying              
          the WACC discount rate to the sales projections and terminal                
          value, Gooch arrived at a synergistic value of $24.18 million and           
          a stand-alone value of $17.05 million.                                      
               Gooch also used the market multiple approach to value                  
          Schlegel UK, focusing on the market value of invested capital               
          (MVIC) as the primary indicator of value.  MVIC is the sum of the           
          market value of the common stock of a comparable company, the               
          market value of the interest-bearing debt of the comparable                 
          company, and the preferred stock.  Gooch calculated the following           
          market multiples using nine purportedly comparable companies:               
                                   Comparable  Comparable      Selected               
                     Multiple       Average     Median     Multiple                   
                    MVIC/sales     0.70      0.62           0.65                      
                    MVIC/EBITDA    5.50      5.42           5.50                      
                    Market value/EBIT    7.05         7.137.00                           
                    Price/adjusted                                                    
                    Net income          10.33        10.78          10.50             







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Last modified: May 25, 2011