COMMONWEALTH ASSOCIATES Sample Clauses

COMMONWEALTH ASSOCIATES. WEDGESTONE FINANCIAL -------------------------------------------------------------------------------- DERIVATION OF WEIGHTED AVERAGE COST OF CAPITAL: ASSUMING FULL LOSS OF NOL Assumptions: Wedgestone --------------------------------- ----------- Pre-tax cost of debt (1) 13.59% Rf (Risk Free Rate) (2) 5.75% Rm (Market Return) - Rf (3) 12.25% T (Effective Tax Rate) (4) 40.00% Beta (Equity) (5) 0.58 Cost of Equity = Rf + Beta * (Rm - Rf) COST OF EQUITY 12.86% Debt/Capitalization 51.16% Equity/Capitalization 48.84% --------------------------------- ----------- WACC (6) 12.53% ------------------------------------------------
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COMMONWEALTH ASSOCIATES. WEDGESTONE FINANCIAL -------------------------------------------------------------------------------- OUTLINE OF PRESENTATION EXHIBITS PAGE --------- ----- Three Year Weekly Stock Price History 6 Analysis of Offer Premium to the Co.'s Historical Average Trading Prices 8 Valuation Results 11 Discounted Net Income Analysis 12 Derivation of Weighted Average Cost of Capital 13 (Assuming Maintenance of NOL) Discounted Cash Flow: Stand Alone 14 (Assuming Maintenance of NOL) Derivation of Weighted Average Cost of Capital 15 (Assuming Full Loss of NOL) Discounted Cash Flow: Stand Alone 16 (Assuming Full Loss of NOL) Historical P/E Ratios Applied to 1997 Estimated EPS 18 Management's Projected Financials 21-25
COMMONWEALTH ASSOCIATES. WEDGESTONE FINANCIAL -------------------------------------------------------------------------------- EXECUTIVE SUMMARY -------------------------------------------------------------------------------- CONFIDENTIAL COMMONWEALTH ASSOCIATES -------------------------------------------------------------------------------- WEDGESTONE FINANCIAL -------------------------------------------------------------------------------- EXECUTIVE SUMMARY Commonwealth Associates has been requested by the Special Committee to the Board of Directors of Wedgestone Financial ("Wedgestone") to render an opinion as to the fairness, from a financial point of view, to the shareholders of Common Stock of Wedgestone of the proposed tender offer ("The Offer") by Wedgestone to purchase shares of Common Stock of Wedgestone at $.65 per share, net to the seller in cash. Wedgestone, with a current market capitalization of approximately $7.2 million and $6.8 million of net debt, is a manufacturer of Specialty Automotive Parts including bumpers and tubing products. The Company maintains manufacturing facilities in St. Xxxxx, Minnesota and Irwindale, California, as well as a plating plant in Industry City, California. The Company's "fair value" has been particularly difficult to determine due to the lack of publicly traded comparables and the Company's decision not to solicit third party offers. However, based on various discounted cash flow analyses, the company's historical trading partners, and other financial analyses, we have determined that the purchase price of $.65 is fair.
COMMONWEALTH ASSOCIATES. WEDGESTONE FINANCIAL -------------------------------------------------------------------------------- ADDITIONAL DISCLOSURE Within the past 12 months Commonwealth has conducted work for, and received fees from, two companies for which one of Wedgestone's surviving shareholders currently serves as a director.
COMMONWEALTH ASSOCIATES. WEDGESTONE FINANCIAL -------------------------------------------------------------------------------- ---------------------------------------------------- BACKGROUND AND CHRONOLOGY OF EVENTS ---------------------------------------------------- -------------------------------------------------------------------------------- CONFIDENTIAL COMMONWEALTH ASSOCIATES -------------------------------------------------------------------------------- WEDGESTONE FINANCIAL -------------------------------------------------------------------------------- CHRONOLOGY:
COMMONWEALTH ASSOCIATES. WEDGESTONE FINANCIAL -------------------------------------------------------------------------------- THREE YEAR WEEKLY STOCK PRICE HISTORY Over the last three years Wedgestone's highest weekly closing trading price of $.78125 occurred on January 9, 1995. Wedgestone's lowest closing trading price of $.20 occurred on May 9, 1997. [GRAPH]
COMMONWEALTH ASSOCIATES. WEDGESTONE FINANCIAL -------------------------------------------------------------------------------- MARKET PRICE FOR COMMON STOCK We have reviewed the trading history of the Common Stock and determined that the Offer represents a significant premium over the historic average market prices for the Company's Common Stock. In arriving at this conclusion, we examined the average daily closing market price for various periods from April 8, 1994 to January 29, 1998. We have concluded that (i) while the single highest closing price per share of Common Stock since April 8, 1994 was $0.875 on November 7, 1994; the Company's average weekly closing price over this period has been approximately $.33. Since September 14, 1996, the closing market price has not been above $0.65 per share; and (iii) the Offer represents an approximate 94% premium over the average weekly closing prices for the Common Stock since April 8, 1994. Additionally, the Offer represents a 49%, 75% and 110% premium to the average daily closing prices in calendar year 1995, 1996, and 1997 respectively. While acknowledging the existence of higher and lower "take-over" premiums, we consider the Common Stock's recent trading history as favorable to our opinion as to the fairness of the consideration to be received by the Public Shareholders pursuant to the terms of the Offer.
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COMMONWEALTH ASSOCIATES. WEDGESTONE FINANCIAL -------------------------------------------------------------------------------- ANALYSIS OF OFFER PREMIUM TO THE COMPANY'S HISTORICAL AVERAGE TRADING PRICES
COMMONWEALTH ASSOCIATES. WEDGESTONE FINANCIAL -------------------------------------------------------------------------------- -------------------------------------------- SUMMARY RESULTS OF VALUATION METHODOLOGIES -------------------------------------------
COMMONWEALTH ASSOCIATES. WEDGESTONE FINANCIAL -------------------------------------------------------------------------------- VALUATION PROCESS We have estimated Wedgestone's potential value using the following financial methodologies: - Stand Alone Discounted Net Income - Stand Alone Discounted Cash Flow (assuming maintenance of NOL) - Stand Alone Discounted Cash Flow (assuming full loss of NOL) - Historical P/E Ratios Applied to 1997 Estimated EPS
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