Discounted Cash Flow

10 Year Projections

2014
Sales

2015

2016

Projected Year Ending January 31, (a)

2017
2018
2019
2020

WACC: based on average unlevered betas of comparable companies

2021

2022

2023

$4,056.1 $4,347.3 $4,671.6 $5,033.2 $5,436.8 $5,872.9 $6,285.1 $6,663.5 $6,998.0 $7,279.3

EBITDA
Less: depreciation
Less: amortization
EBIT
Less: taxes @
34.6%
Tax-effected EBIT

916.7 1,060.7 1,224.0 1,409.3

(176.1) (203.5) (235.5) (271.1)
(4.4)
(4.4)
(4.2)
(4.2)
736.2
852.9
984.3 1,133.9
(254.7) (295.1) (340.6) (392.3)
481.4
557.8
643.7
741.6

1,620.2
(311.0)
(4.2)
1,305.0
(451.5)
853.5

1,538.7 1,615.3 1,679.2 1,728.5 1,761.6

(311.0) (315.8) (320.5) (325.3) (330.1)
(4.2)
(4.2)
(4.2)
(4.2)
(4.2)
1,223.5 1,295.3 1,354.5 1,399.0 1,427.3
(423.3) (448.2) (468.6) (484.1) (493.9)
800.2
847.1
885.8
914.9
933.5

Plus: depreciation
176.1
Plus: amortization
4.4
Less: capital expenditures
(230.0)
Less: additions to definite life intangibles
0.0
+ / - Changes in working capital
(95.3)
+ / - Changes in other assets and liabilities 0.0

203.5
4.4
(260.8)
0.0
(131.2)
0.0

235.5
4.2
(280.3)
0.0
(144.8)
0.0

271.1
4.2
(302.0)
0.0
(159.8)
0.0

311.0
4.2
(326.2)
0.0
(176.5)
0.0

311.0
4.2
(326.2)
0.0
(176.5)
0.0

315.8
4.2
(331.2)
0.0
(156.5)
0.0

320.5
4.2
(336.2)
0.0
(136.5)
0.0

325.3
4.2
(341.2)
0.0
(116.5)
0.0

330.1
4.2
(346.2)
0.0
(96.5)
0.0

Unlevered free cash flow

Unlevered free cash flow growth rate

$373.6
11.0%

$458.3
22.7%

$555.1
21.1%

$665.9
20.0%

$612.6
(8.0%)

$679.3
10.9%

$737.8
8.6%

$786.7
6.6%

$825.0
4.9%

$336.7

Unleveraged Beta
Leveraged Beta
Marginal Tax Rate

1.086
1.159
34.6%

1.102
1.176
34.6%

1.131
1.207
34.6%

3.9%
4.4%
4.8%
5.3%
5.8%

66.1%
65.7%
65.2%
64.7%
64.3%

67.3%
66.8%
66.4%
65.9%
65.4%

WACC

Cost of Debt (after Tax)

Cost of Equity
WACC

3.92%
10.52%
9.91%

WACC

3.92%
10.73%
10.09%

WACC: based on the Tiffany & Co. beta

Unleveraged Beta
Leveraged Beta
Marginal Tax Rate

Terminal
Terminal
value
value
asas
a%
a of
% of
enterprise
EV
value
9.5x
10.0x
10.5x

4.3%
4.8%
5.3%
5.8%
6.3%

3.92%
10.40%
9.80%

WACC: Based on median unlevered betas of comparable companies

Unleveraged Beta
Leveraged Beta
Marginal Tax Rate

Implied perpetuity growth rate

9.5x
10.0x
10.5x
4.1%
4.6%
5.1%
5.6%
6.0%

Cost of Debt (after Tax)

Cost of Equity

68.3%
67.9%
67.4%
67.0%
66.5%

Cost of Debt (after Tax)

Cost of Equity

Value per diluted share (e)

9.5x
10.0x
10.5x
$78.95
75.82
72.83
69.98
67.26

$81.81
78.55
75.44
72.48
69.64

$84.67
81.29
78.05
74.97
72.03