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DISCOUNTED CASHFLOW VALUATION Required rate of return inputs Do you want to input the cost of equity directly ? If yes, enter the cost of equity for use in valuation If not, enter the following: Beta of the stock Riskless rate Risk premium over riskless rate 0.32 4.25% 5.00% (in percent) (in percent) No (Yes or No) (in percent)

General Inputs What is the current earnings per share of the firm? Is this EPS negative or abnormally low or high? If yes, enter the normalized earnings per share $3.05 No (in currency) (Yes or No) (In currency)

What is the current dividend payout ratio?

26.90%

(in percent) No (in percent) (Yes or No)

Do you want to change this payout ratio for high growth period? If so, enter the payout ratio to be used :

Enter the following information from the firm's financial statements:: Total Debt outstanding Interest Expense on this debt Book Value of Equity Number of shares outstanding Market price per share $43,600.00 (in currency) $2,000.00 (in currency)

$63,000.00 (in currency) 4000 $48.00 (in units) (in currency)

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Tax Rate

34%

Enter the following information if you want to compute the FCFE Value Total Revenues Working Capital as % of Revnue Capital Spending Depreciation ########## (in currency) 1.00% (in percent)

$15,145.00 (in currency) $6,102.00 (in currency)

Enter the following information to compute growth in net income in high growth period: Do you want to use the historical growth rate in earnings? If yes, enter the EPS from five years ago Yes $2.07 (Yes or No) (in currency)

Do you want to compute the growth rate from fundamentals? If yes, note that based upon current inputs, the fundamentals are as follows: ROA D/E 12.68% 0.227083333 Interest rate Retention 4.59% 0.73

Yes

(Yes or No)

Do you want to change these inputs for the high growth period? If yes, enter the new values for these variables: ROC D/E 12.68% Interest rate 4.59% 0.73

No

(Yes or No)

0.227083333 Retention

Do you have an outside projection of growth (Analysts, VL) ? If yes, enter the projected growth rate in earnings 8.00%

Yes (in percent)

(Yes or No)

Enter the weights to be assigned to these estimates of growth

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Fundamental growth Analyst projection Historical growth

100.00% 0.00% 0.00%

(in percent) (in percent) (in percent)

Do you expect capital spending and depreciation to grow at the same rate as earnings? If no, enter the following for the high growth period: Growth rate in capital spending Growth rate in depreciation (in percent) (in percent)

Yes

(Yes or No)

AFTER HIGH GROWTH PERIOD What approach do you want to use to calculate terminal price? 1 (Enter 1 if Gordon or 2 if PE)

If Gordon Growth model is chosen, enter the following inputs: Stable growth rate after high growth period 5.00% (in percent) Yes (Yes or No)

Do you want the payout ratio to be computed from fundamentals?

If no, enter the payout ratio for the stable growth phase

If yes, the fundamentals from the high growth period are as follows: ROA D/E 12.68% 0.227083333 Interest rate Retention 4.59% 0.73 Yes (Yes or No)

Do you want to change these fundamentals? If yes, enter the new values for these fundamentals for the steady state: ROA 12.68% Interest rate 4.59%

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D/E

0.227083333

Retention

0.73

Do you want capital spending to offset depreciation in stable growth phase? If no,enter the capital expenditures as a percent of depreciation in stable growth phase

No 110%

(Yes or No) (in percent)

Do you want to change the beta for the stable growth phase? If yes, enter the beta for the stable growth phase 0.80

yes

(Yes or No)

If PE ratio approach is chosen, enter the following input: PE ratio at the end of the high growth phase 16.00

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VALUATION WITH DDM AND FCFE MODELS STEP 1: Estimate the required rate of return for stockholders: Beta= 0.32 Riskfree Rate = 4.25% Exp. Return = 5.85% Market risk premium = 5.00% STEP 2: Estimate the growth rate in earnings per share Payout ratio= 26.90% Debt = 43600 Net Income= $12,200 Share Price= $48.00 Interest Exp.= $2,000 # Shares = 4000 Total Assets= $106,600 Current EPS= $3.05 Revenues = $370,449 Weights Growth rate from fundamentals = 10.87% 100.00% Projected growth rate (from VL/analysts)= 8.00% 0.00% Historical growth rate (Last 5 years) = 8.06% 0.00% Weighted Average growth rate = 10.87%

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Depreciation (Total) = Capital spending (Total)= Work. Cap. as% of Rev= EPS five years ago=

6102 15145 1.00% $2.07

First 5 yrs After yr 5

ROC D/E Ratio Interest rate 12.68% 22.71% 4.59% 12.68% 22.71% 4.59% (Change these if you want after year 5)

STEP 3: Inputs for terminal value Approach used to estimate terminal value (1: Infinite growth; 2: PE ratio)= 1 Beta of the stock for the stable growth phase = 0.70 If infinite growth rate model chosen, enter the growth rate after year 5 Growth rate after year 5 = 5.00% Payout ratio after year 5 = 66.39% Calculated based upon fundamentals If PE ratio model chosen, enter the PE ratio to be used after year 5 PE ratio for earnings after year 5= STEP 4: Inputs for free cashflow valuation Growth rate in depreciation per share = Growth rate in cap. spending per share =

10.87% 10.87%

(Default: If not entered, = to the weighted growth rate in income) (Default: If not entered, = to the weighted growth rate in income) from the Free Cashflow model Cap. Exp. $4.20 $2.04 $0.08 $4.65 $2.26 $0.09 $5.16 $2.51 $0.10 $5.72 $2.78 $0.11 $6.34 $3.09 $0.12

STEP 5: Estimate the value from the dividend discount model Year EPS DPS TERM. PR. Deprec'n 1 $3.38 $0.91 $1.69 2 $3.75 $1.01 $1.88 3 $4.16 $1.12 $2.08 4 $4.61 $1.24 $2.31 5 $5.11 $1.37 $129.54 $2.56

FCFE/sh $1.26 $1.39 $1.55 $1.71 $1.90

Term. Val.

$184.87

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VALUE OF THE STOCK (DDM) = VALUE OF THE STOCK (FCFE) =

$102.21 $145.65

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Sensitivity to Length of High Growth Period If growth lasts DDM Value FCFE Value 1 $81.84 $140.31 2 $86.58 $141.56 3 $91.55 $142.86 4 $96.76 $144.23 5 $102.21 $145.65 6 $107.92 $147.15 7 $113.90 $148.72 8 $120.17 $150.36 9 $126.73 $152.08 10 $133.61 $153.89

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These FCFE values are estimated based upon the following assumptions a. Earnings and depreciation grow at the same rate as earnings. b. Terminal Value is calculated using the same assumptions as the base case

If the extraordinary growth period you want is not in this table, enter below Enter the length of the high growth period = 5 DDM Value given this high growth period= $102.21 FCFE Value given this high growth period = $145.65