1) What corporate structure would you recommend for Humana? That is, describe the advantages and disadvantages of the restructuring options considered by the firm. Place special emphasis on the spin-off alternative. Do you think the spin-off is a good idea? Why is management considering it?
2) Assume that the spin-off alternative is chosen. How would you have it be financially structured? What should the resulting financial structures of the separate firms look like?
3) What price should you expect to get for the spin-off? How much value is created from the spin-off? I am looking for a thorough valuation analysis. A DCF analysis will require that you make some assumptions. I will give you a lot of leeway in making your assumptions — I am just looking for good logic — so determine what assumptions you need to make and SPELL THEM OUT. In addition, assume that the inflation rate is 3% and Government Bond rates are 4% for T-bills, 5% for the 5-year UST, and 6% for the Long Bond.