1998 1999 2000 2001 2002

Operations

Sales $ 48.5 $ 49.1 $ 53.7 $ 54.8 $ 55.3

Cost of Goods 32.6 33.1 35.9 37.2 37.9

Selling, General and

Administrative Costs 10.7 11.1 11.5 11.9 12.3

Depreciation Expense 2.0 2.3 2.4 2.3 2.1

Interest Expense .4 .7 .8 .8 .8

Income Before Taxes 2.8 1.9 3.1 2.6 2.2

Taxes 1.1 .8 1.2 1.0 .9

Net Income $1.7 $1.1 $1.9 $1.6 $1.3

Percentage of Sales

Cost of Goods 67% 67% 67% 68% 69%

Sell, Gen’l, Admin. 22% 23% 21% 22% 22%

Operating Income 6.6% 5.3% 7.3% 6.2% 5.4%

Stockholder Information

Earnings Per Share $ 2.91 $ 1.88 $ 3.25 $ 2.74 $ 2.23

Dividends Per Share 1.60 1.60 1.60 1.60 1.60

Book Value Per Share 49.40 49.68 51.33 52.47 53.10

Market Price 33-46 35-48 29-41 25-33 23-32

Price/Earnings Ratio 11-16 10-26 9-13 9-12 10-14

Shares Outstanding 584,000 584,000 584,000 584,000 584,000

Exhibit 1 Condensed Operating and Stockholder Information, Robertson Tool Company (millions of dollars except per-share data)

Assets Liabilities and Net Worth

Cash $ 1 Accounts Payable $ 2

Accounts Receivable 8 Other 2

Inventories 18 Current Liabilities 4

Other 1 Long-term Debt 12

Current Assets 28

Net Plant and Equipment 19 Net Worth 31

Total Assets $ 47 Total $ 47

Collection Period (days) 53 Debt as % Capital 28%

Days of Inventory (days) 173 Total Assets/Net Worth 1.52

Sales/Total Assets 1.18

Exhibit 2 Balance Sheet at December 31, 2002, Robertson Tool Company (millions of dollars)

1998 1999 2000 2001 2002

Operations

Sales $ 45 $ 97 $ 99 $ 98 $ 100

Net Income 1.97 3.20 3.20 1.13 2.98

Financial Position

Current Assets $ 25 $ 46 $ 49 $ 41 $ 46

Current Liabilities 6 11 15 10 13

Net Working Capital 19 35 34 31 33

Long-term Debt 10 18 16 15 17

Shareholders’ Equity 21 36 40 41 41

Stockholders Information

Earnings Per Share $ .78 $ .61 $ .59 $ .21 $ .54

Dividends Per Share 0 0 0 0.20 0

Book Value Per Share 8.31 6.86 7.37 7.38 7.45

Market Price 6-17 10-18 7-18 4-10 5-8

Price/Earnings Ratio 8-22 16-30 12-31 19-48 9-15

Shares Outstanding 2,525,600 5,245,900 5,430,100 5,510,000 5,501,000

Exhibit 3 Condensed Operating and Stockholder Information, NDP Corporation (millions of dollars except per-share data)

Actual Forecasts

2002 2003 2004 2005 2006 2007 to Infinity

Sales 55.3 $ 58.6 $ 62.1 $ 65.9 $ 69.8 $ 69.8

Cost of Goods 37.9 39.8 41.6 43.5 45.4 45.4

Gross Profit 17.4 18.8 20.5 22.4 24.4 24.4

Sell & Admin 12.3 12.3 12.4 12.5 13.3 13.3

Depreciation 2.1 2.3 2.5 2.7 2.9 2.9

EBIT 3.0 4.2 5.6 7.2 8.2 8.2

Tax @ 40% 1.2 1.7 2.2 2.9 3.3 3.3

EBIAT $ 1.8 $ 2.5 $ 3.4 $ 4.3 $ 4.9 $ 4.9

CoGS % Sales 69% 68% 67% 66% 65% 65%

Sell & Admin % Sales 22% 21% 20% 19% 19% 19%

Beginning of Year 19.0 20.7 21.7 22.6 23.5

Capital Expenditures -4.00 -3.50 -3.60 -3.80 -2.90

Depreciation Expense 2.3 2.5 2.7 2.9 2.9

End of Year $ 20.7 $ 21.7 $ 22.6 $ 23.5 $ 23.5

Total Gross Fixed Assets 23.00 24.20 25.30 26.40 26.40

Exhibit 4 ProFormas for Robertson Tool (millions of dollars)

Net Plant & Equip @

Net Plant & Equip @

2003 2004 2005 2006 2007

Net Income $ 11.0 $ 11.9 $ 12.8 $ 13.8 $ 15.0

Shares Outstanding (mil) 4.21 4.21 4.21 4.21 4.21

Earnings Per Share $ 2.61 $ 2.83 $ 3.04 $ 3.27 $ 3.56

Exhibit 5 Five-Year Forecast of Monmouth, Inc. Earnings, Excluding Robertson Tool (millions of dollars except per-share data)

Actuant Corp. Briggs & Stratton Idex Corp. Lincoln Electric Snap On Inc. Stanley Works

Collection Period (days) 55 77 47 61 96 77 53

Inventory % Sales 12% 18% 13% 17% 18% 16% 33%

Operating Margin % Sales 17% 13% 20% 15% 10% 15% 5%

Return on Capital 21% 9% 10% 12% 11% 14% 4%

Times Interest Earned 3.8 3.2 7.1 11.5 7.8 9.3 3.5

Debt % Capital

98% 52% 30% 27% 29% 40% 28%

29% 37% 20% 17% 19% 24% 37%

Bond Rating BB- BB+ BBB - A+ A -

Value of Firm ($ mil) $ 712 $ 1,443 $ 1,191 $ 1,145 $ 1,861 $ 3,014 $ 29

EBIAT ($ mil) 55 119 98 90 129 234 1.80

EBIAT Multiple 12.8 12.1 12.2 12.7 14.4 12.9 16.1 Average Asset Beta 0.725

Share Price $ 42 $ 42 $ 29 $ 22 $ 26 $ 27 $ 30 Equity Beta 0.894167Earnings Per Share 2.80 3.20 2.00 1.78 1.80 2.32 2.32

Price/Earnings 15.0 13.1 14.5 12.4 14.4 11.6 13.5

Equity Beta 1.00 1.00 1.00 .75 1.05 .95

Asset Beta 0.71 0.63 0.8 0.63 0.85 0.73

Exhibit 6 Selected Financial Information on Quasi-Comparable Firms, 2002Robertson Tool

Co.

·         balance sheet values

·         market values

I. Interest Rates in May 200330-Year U.S. U.S. Corporate Bonds Rated

Treasury Bonds AA A BBB BB

4.10% 4.52% 5.07% 6.07% 7.96%

II. Estimated Market Risk Premium = 5.5% over 30-Year U.S. Treasury Bonds

III. Median Values of Key Ratios by Standard & Poors’ Rating CategoryAAA AA A BBB BB B

Times Interest Earned (X) 27.3 18.0 10.4 5.9 3.4 1.5

EBITDA / Interest (X) 31.0 21.4 12.8 7.6 4.6 2.3

Pre-tax Return on Capital (%) 25.2 25.4 19.7 15.1 12.5 8.8

Debt as % Capital (%) 12.6 36.1 38.4 43.7 51.9 74.9

Number of companies 6 15 118 213 297 345

IV. Debt and Times Interest Earned Ratios for Selected IndustriesAAA AA A BBB BB

Food Processing

Debt % Capital 44% - 51% 54% 53%

Times Interest Earned 7.9 - 6.7 4.3 2.9

Electrical Equipment

Debt % Capital - - 36% 48% 72%

Times Interest Earned - - 7.3 3.2 1.6

Electric Utilities

Debt % Capital - 46% 54% 57% 73%

Times Interest Earned - 4.0 3.4 2.7 2.0

2002 TerminalRfr 0.041 0.041Kd 6.67% 6.67% 0.71098Ke 9.02% 9.60%Debt 28% 28%Equity 72% 72%Beta 0.89417 1WACC 7.613% 8.032%

Exhibit 7 Information on United States Capital Markets

Group NO 4

Chinmay PrakashNavneet SinhaMukul YadavDilip MathewSagar DariraTejaswi Sabinnenni

Assumptions Growth rate for next 5 years Terminal

Sales Increase 5.00 3.00

COGS/Sales 65.00 65.00

Selling&Admin/Sales 19.00 19.00

Tax 40.00% 40.00%

Depreciation/Gross Fixed Assets 0.10 0.10

Working Capital/Sales 43.00 43

Relative Valuation using EBIAT Multiple

Valuation - Comps summary (From Exhibit 6)

Multiple Min Max AverageEV/EBIAT 12.10 14.40 13.31

Valuation - Estimate (Rs.Mn)Multiple Value - Min Value -Max Value -AverageEV/EBIAT 59 71 65Less: Debt 12 12 12Equity Value 47 59 53Value per share 81 100 91

We have already provided the buttons for analysing the sensitivity for diff parameters. Above that we are also providing 3 custom scenarios for easy viewing

Sensitivity Analysis

Optimistic Normal PessimisticGrowth Rate 7% 5% 3%LTGR 4% 3% 2%COGS/Sales 60% 65% 70%S & A/ Sales 15% 19% 23%WC/Sales 40.00 43.00 46.00Expected MP 176.90 62.19 -0.55

Expected Market Prices

2002 2003 2004 2005 2006 2007 to InfinitySales 55.3 58.07 60.97 64.02 67.22 69.23COGS 37.9 37.74225 39.6293625 41.61083 43.69137 45.00211Selling and Admin Expense 10.507 11.03235 11.5839675 12.16317 12.77132 13.15446Depreciation 2.1 2.30 2.42 2.53 2.64 2.64EBIT 4.793 6.9904 7.33492 7.712666 8.114799 8.437443EBIT*(1-t) 2.8758 4.19424 4.400952 4.6276 4.86888 5.062466Capex 4 3.5 3.6 3.8 3.8WC 24 24.96795 26.2163475 27.52716 28.90352 29.77063Change in WC 0.96795 1.2483975 1.310817 1.376358 0.867106FCFF 1.53 2.07 2.25 2.33 3.04Terminal Value 60.32115FCF 1.53 2.07 2.25 62.65NPV ₹ 51.73Add Cash 1Less Debt 12FCFE 40.729419413Value per Share 69.504128691

Relative Valuation using EBIAT Multiple

Valuation - Comps summary (From Exhibit 6)

4.90

Buttons are provided to check the sensitivity for different growth rates over

the share price.

We have taken the 2007 value of EBIAT as the firm wants to achieve this Stable value after synergy takes

place for the combined firm

EBIAT for Robertson Tools (2007)

We have already provided the buttons for analysing the sensitivity for diff parameters. Above that we are also providing 3 custom scenarios for easy viewing

Sensitivity Analysis

Optimistic Normal Pessimistic79.40 69.50 60.1081.50 69.50 61.50

132.70 69.50 6.30120.04 69.50 18.90

21.70 69.50 117.40

2007 to Infinity

Q.1 Find whether Robertson toll is a good fit or not andwhy Mr. Vincent want to acquire the control of the firm?Monmouth is leading producer of engines and massive compressors.Its high dependence on sale of oil and gas industries.Robertson tool had poor sales and profit performance in recent few years. But they had basic competitive strength. They were one of the largest domestic manufacturers of cutting & edge hand tools and leader in two main product areas - clamps & vises and scissors & shears.Their greatest asset was distribution system. Sales people marketed its products to 2100 hardware wholesalers which in turn sold to 15000 retail outlets in US and Canada.Overseas company products were sold in 137 countries through sales represntatives. So,the great distribution system of Robertson will help in selling of the products of Monmouth thus reducing their selling expense and also it would lead to decrease in the inventories too.

Q.3 Why is Simmons eager to sell its position to Mommouth for $50 per share?Simmon is falling short of 24900 shares to gain a majority stake at Robertson tool and also fear that if Robertson merge with NDP then the value os shares with them will fall because of lack luster performance of stock of NDP.The merger would allow the conversion of shares into common stock of Monmouth and also there would be acceptable exchange rate. But if they support the merger of Monmouth and Robertson Tools it would allow the price appreciation from cyclical downturn as they have anticipated.Also, trading on NYSE would cause increase in liquidity.So, atleat $50 per share wich was just $3 less than the book value would be a good price.

Find whether Robertson toll is a good fit or not andwhy Mr. Vincent want to acquire the control of the firm?Monmouth is leading producer of engines and massive compressors.Its high dependence on sale of oil and gas industries.Robertson tool had poor sales and profit performance in recent few years. But they had basic competitive strength. They were one of the largest domestic manufacturers of cutting & edge hand tools and leader in two main product areas - clamps & vises and scissors & shears.Their greatest asset was distribution system. Sales people marketed its products to 2100 hardware wholesalers which in turn sold to 15000 retail outlets in US and Canada.

So,the great distribution system of Robertson will help in selling of the products of Monmouth thus reducing their selling expense and also it would lead to decrease in the inventories too.

Simmon is falling short of 24900 shares to gain a majority stake at Robertson tool and also fear that if Robertson merge with NDP then the value os shares with them will fall because of lack luster performance of stock of NDP.The merger would allow the conversion of shares into common stock of Monmouth and also there would be acceptable exchange rate. But if they support the merger of Monmouth and Robertson Tools it would allow the price appreciation from cyclical downturn as they have anticipated.

Simmon is falling short of 24900 shares to gain a majority stake at Robertson tool and also fear that if Robertson merge with NDP then the value os shares with them will fall because of lack luster performance of stock of NDP.

Monmouth 2003 2004 2005 2006 2007

Net Income 11 11.9 12.8 13.8 15Shares Outstanding (mil) 4.21 4.21 4.21 4.21 4.21Earnings Per Share 2.61 2.83 3.04 3.27 3.56

2003 2004 2005 2006 2007EBIT 4.793 6.9904 7.33492 7.712666 8.114799Interest Exp 0.710976 0.710976 0.710976 0.710976 0.710976EBT 4.082024 6.279424 6.623944 7.00169 7.403823Taxes 1.63281 2.51177 2.649578 2.800676 2.961529Net Income 2.449214 3.767654 3.974366 4.201014 4.442294

Net Income (Combined Firm) 13.44921 15.66765 16.77437 18.00101 19.44229Desired EPS 2.61 2.83 3.04 3.27 3.56

Desired No. of Shares 5.152956 5.536274 5.517884 5.504897 5.461319Increase in Shares 0.942956 1.326274 1.307884 1.294897 1.251319Exchange Ratio 0.22398 0.315029 0.310661 0.307577 0.297225

Monmouth

Robertson

These are the Exchange ratios which will help Manmouth to masintain the same EPS.

Combined Firm