Berkshire Partners: Bidding for Carter’s Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Berkshire Partners: Bidding for Carter’s Case Solution

Carter was one of the most successful companies in the field of baby products, which was considered to be the source for its revenues and growth and that it would reach to optimize its growth in the future. Therefore,in order to judge the expected growth rate of the company, the following analysis has been taken into consideration to know the projected worth of the company.

First of all, it has been analyzed that the growth rate will decrease by 2006 because the company might engage with recapitalizing in the future because of the increasing awareness of the baby products in the U.S market.

Therefore, the expected value of sales given by the management might be appropriate to execute asit was considered that the best management was involved to value the company under different considerations.

The total gross profit under the case might increase in the coming timeof the company because it was analyzed that the cost of goods sold would decrease because of the less price of the raw materials to be produced. Therefore, it indicates that the company will be profitable enough to produce enough revenues to extend the size of operations in different parts of the country.

Thus,the impact of cost reduction in the material will definitely affect the operating expense of the company, therefore the level of selling and administration expense will decrease consistently throughout the number of selected years proposed by the management. It was also estimated by the management that these costs would consecutively depend on the cost associated with the product.

The operating income is the level of margin before the reduction of depreciation incurred in the fixed assets, the interest which will pay to the debt provider and the taxes to be paid from the given amount. Therefore,during the course of action implemented by the management of Carter, it is concluded that the rate of operating income will consecutively increase year by year and hence, itindicates that the decrease in cost of products and administration expenses will definitely increase the size of operating margin. On the other hand,the last two years indicate the same level of operating income incurred by the company, which shows that the level of sales would be modestly increase in the last year and therefore not increase in the same margin during the year as compared to other previous years.

Depreciation will occur on the straight line method and thus, it will allow the company to increase the level of earrings after the depreciated value. It was assumed by the management that the level of earrings after depreciation would increase because of the size of operating income after gross profit margin. Therefore, it would be also decided to value the company under this margin with different industry comparable.

Capital expenditure in this case was decreased throughout the number of years given by the management of Carter, therefore it is assumed that the level of capex will decrease and the company in that case will not increase the capital expenditure due to the established product line.

The case is not providing the level of tax rate imposed to the company under the value of earnings after interest, therefore it is assumed to be 35% of tax because of the current marginal tax imposed to different industries. Under the level of interested paid to the debt provider, the company has two type of debt services: first is the term loan and the second is the senior sub notes. Therefore, in order to analyze the total value of debt and the interest rate generated by these debts, the comparable rate of 8.1% is given to the term loan B because the interest rate market was declining the percentage in the past few years. The other debt is assumed to be 10.9% which is also selected by analyzing the current market debt situation....................

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