FCFF VALUATION MODEL

Before you start The spreadsheet has circular reasoning. This is not a problem. Go into calculation options (in excel) and check
the iteration box.
What the model does
This model is designed to value firms with operating income that is either positive or can be normalized to be
positive. It allows for up to 15 years of high growth, and can be used either as a 2-stage or a 3-stage model.
Inputs
The inputs are in the following pages:
1. The bulk of the inputs are in the master inputs page. Here, you can input the numbers from the current
financial statements, and review and change the inputs for the valuation.
2. If you want to normalized operating income, use the earnings normalizer worksheet.
3. If you have R&D or operating leases, you will need to input the required numbers in those worksheets.
Important: Be consistent about the units you use. If you use millions, use millions for all of your inputs.
Options
The spreadsheet can be used to value a company, with fixed inputs for a high growth phase and different inputs
for a stable growth phase (2-stage model) or it can be adjusted to allow for a transition phase (3-stage model).
To switch from one to the other, enter yes in the master input page to the question of whether you want the
inputs adjusted during the second half of the high growth phase.
You can even make it a stable growth model, by setting the length of the high growth period to zero.
Other worksheets There are two other worksheets that you might find useful at the end of this spreadsheet
1. Bottom-up beta estimator: will estimate your levered beta, given an unlevered beta (which you will have to
input.
2. Industry averages: Here, you can look up industry averages for variables such as beta, return on capital,
reinvestment rates and working capital.
Output
The output is contained in the valuation model worksheet.

n excel) and check
normalized to be
3-stage model.

and different inputs
e (3-stage model).
er you want the

h you will have to

urn on capital,

An apology: I apologize for the number of inputs that are required on this sheet. Many of the inputs are required only if you choo
If you have negative operating income, you will either have to normalize it to make it positive, or use the highgrowth.xls spreads

Master Input Sheet
Do you want to capitalize R&D expenses?
Do you want to convert operating leases to debt?
Do you want to normalize operating income?

No
No
Yes

Inputs
From Current Financials
Current EBIT =
Current Interest Expense =
Current Capital Spending
Current Depreciation & Amort'n =
Tax rate (for computing after-tax operating income) =
Marginal tax rate =
Current Revenues =
Current Non-cash Working Capital =
Chg. Working Capital =
Book Value of Debt =
Book Value of Equity =

INR 17,527.00
INR 6,737.00
INR 40,291.00
INR 8,701.00
21.00%
33.99%
INR 265,868.00
-INR 4,085.00
INR 2,732.00
INR 131,657.00
INR 122,301.00

Cash & Marketable Securities =

INR 11,418.00

Value of Non-operating Assets =
Minority Interests (this is a liability) =

INR 140,575.98
INR 0.00

Price to Book Ratio of sector with minority holdings =
Market Data for your firm
Is your stock currently traded?
If yes, enter the following:
Current Stock Price =
Number of shares outstanding =
Market Value of Debt =
If no, enter the following
Would you like to use the book value debt ratio?
If no, enter the debt ratio to use in valuation

2.10
Yes
INR 780.50
413.05
INR 109,197.99

General Market Data
Long Term Treasury bond rate=
Mature Market Equity Premium =
Country Equity Risk Premium =
Exchange Rate for fiscal year items (BR/$) =
Exchange Rate for currrent price conversions =
Ratings
Do you want to estimate the firm's synthetic rating =
If yes, choose the type of firm
If not, what is the current rating of the firm?
Enter the cost of debt associated with the rating =
Options
Do you have equity options (management options, warrants) outstanding?

No
35%

5.00%
4.50%
4.50%
R$ 1.00
R$ 1.00
No
2
B+
12.25%

No

If yes, enter the number of options
2.23
Average strike price
R$ 13.85
Average maturity
1.5
Standard Deviation in stock price
30%
Do you want to use the stock price to value the option or your estimated value?
P
Valuation Inputs
High Growth Period
Length of high growth period =
10
Beta to use for high growth period for your firm=
1.2
Lambda to use for your firm (for both high growth and stable growth) =
0.8
Do you want to keep the debt ratio computed from your inputs?
Yes
If yes, the debt ratio that will be used to compute the cost of capital is
25.30%
If no, enter the debt ratio that you would like to use in the high growth period
7.00%
Do you want to keep the existing ratio of working capital to revenue?
Yes
If yes, the working capital as a percent of revenues will be
-1.54%
If no, enter the ratio of working capital to revenues to use in analysis
4.50%
Do you want to compute your growth rate from fundamentals?
yes
If no, enter the expected growth rate in operating income for high growth period
12%
If yes, the inputs to the fundamental growth calculation (based upon your inputs) are
Return on Capital =
17.16%
Reinvestment Rate =
170.61%
Do you want to change these inputs?
Yes
Return on Capital =
17.16%
Reinvestment Rate =
70.00%
Do you want me to gradually adjust your high growth inputs in the second half?
Yes
Stable Growth Period
Growth rate during stable growth period =
5.00%
Beta to use in stable growth period =
1.00
Country Risk premium for equity in stable growth period =
3.00%
Debt Ratio to use in stable growth period =
25.30%
Pre-tax cost of debt in stable growth period =
9.00%
Tax Rate to use in stable growth period =
33.99%
To compute the reinvestment rate in stable growth, you have two options
Do you want to compute reinvestment needs in stable growth based on fundamentals?
Yes
If yes, enter the return on capital that the firm will have in stable growth 12.00%
If no, enter capital expenditure as % of depreciation in stable growth
120%

395.00 Average maturity of debt = R$ 1. ! Yes or No ! Yes or No Go to R&D Converter Go to Operating lease converter Go to Earnings Normalizer ! If negative.00 INR 78.00 INR 49.805. use the rating estimator worksheet that is attached 3 .n this sheet. or use the highgrowth.00 INR 23.00 Previous year-end INR 62.00 ! If yes.973. alize it to make it positive.xls spreadsheet.226. Previous year-end INR 292. Many of the inputs are required only if you choose the appropriate option. though. go back and choose to normalize earnings.103.

(in percent) .

14508 0.0.13074 .

.

.

4 346 24. Investments with market value Tata Steel 21440882 2699 633 13572.30615 Total 2701. Investments without quoted market price All other investments 137874.6 .4 b.08 Tata Chemicals 70249 2.38 137874.5845 NA 13596.Investment Number of units Book Value (in millions) Current market Market price Value (in millions) a.

46% 1.94% 1.19 5.73% 1.8 1.22% 1.40% 1.00% 1.Business Shipbuilding Offshore & Engineering Industrial plant Engine and Machinery Electro Electric System Construction Equipment Revenues 8341 2563 1200 2252 1753 1823 EV/Sales 3.21 Value 26941 5049 1860 3063 3155 2206 42274 Value WeightUnlevered beta 63.36 1.29 7.21 7.49 .97 1.24% 1.44 4.60 11.55 1.29 100.23 1.

905 EBT INR 16.07 -112 305.43% 7.23 190.92 521.534 EBT Margin 8.96 682.74 57.74 1121.9 2371.06 537.37 174.12 490.03 367.46 615.75% Non-cash WC as % of Revenue 0.56 314.17 1429.648 INR 335.519 INR 20. Historical average pre-tax return on capital = 22% If sector margin Pre-tax Operating Margin for Sector = 7.67% 282 26.464.72 2113.401.83 1281.765 8.688 3.138 INR 98.771 INR 25.78 2527.62 ! Look at industry average 151.Normalizing Earnings Approach used to normalize earnings = 3 If historical average.38 74.6 If historical average ROC.9 Net Cap ex as % of EBIT (1-t) 0.02% 7.17 248.45% Net Cap ex Non-cash WC Inventory Accounts Rec Other Current assets Accounts Payable Other Current Liabilities Normalized reinvestment = -3 -2 INR 320.04% 196.19 474.82 -27 915.08 .00% 8.23 719.07 -1 Total INR 295.252 INR 1.20 Worksheet for normalization (Last 5 years of data) -5 -4 Revenues INR 206.02 1502.18% $39.04% Normalized Earnings before interest and taxes = $25.06 259.98 334.72 149.732 INR 25.09 1386.487 INR 242. Average Earnings before taxes = 19737.063 INR 10.02 291.76 -222.73 358.48 34.

18727.19584 .

00 R&D Expense 1594.20 $139.20 $17.00 211.00 0.40 159.00 $0. Inputs Over how many years do you want to amortize R&D expenses 5 ! If in doubt.80 0.00 0.00 ! Year -1 is the year prior to the current year 698.60 418.20 0.80 $0.80 820.00 Value of Research Asset = Amortization of asset for current year = Adjustment to Operating Income = Tax Effect of R&D Expensing 0.00 0.109.40 Amortization this year $205.60 0.00 1594.00 $0.00 ! Year -2 is the two years prior to the current year 399.00 211.035. the book value of assets and the book value of equity. Tech Service Light Manufacturing Heavy Manufacturing Research.40 ! A positive number indicates an increase in operating income (add to report $377 Look Up Table for Amortization Periods Industry Name Amortization Period Advertising 2 Aerospace/Defense 10 Air Transport 10 Aluminum 5 Apparel 3 Auto & Truck 10 Non-technological Service Retail.00 0.00 0.00 0.00 0.00 $3.594. use the lookup table below Enter the current year's R&D expense = $1.00 0.00 0.00 698.00 Unamortized portion 1.00 89. Year -1 -2 -3 -4 -5 0 0 0 0 0 Output Year Current -1 -2 -3 -4 -5 0 0 0 0 0 R& D Expenses 1026. net income.00 0.80 0.00 0.00 $0.60 $1.00 89.00 The maximum allowed is ten years Enter R& D expenses for past years: the number of years that you will need to enter will be determined by the amortization period Do not input numbers in the first column (Year). with Patenting 2 years 3 years 5 years 10 years 10 years .00 0.00 0. It will get automatically updated based on the input above.80 $42.00 0.60 $484.00 0.20 42.00 399.R & D Converter This spreadsheet converts R&D expenses from operating to capital expenses.00 0.60 $79.00 1026.00 $0.00 $484. It makes the appropriate adjustments to operating income.

(Domestic) Investment Co. (Central) Electric Utility (East) Electric Utility (West) Electrical Equipment Electronics Entertainment Environmental Financial Services Food Processing Food Wholesalers Foreign Electron/Entertn Foreign Telecom. (Foreign) Investment Co. (Income) 5 5 2 2 2 2 3 3 5 10 10 10 10 10 10 5 5 3 5 5 10 3 3 10 10 10 10 5 3 5 2 3 3 5 10 3 5 2 3 5 5 3 3 3 3 3 3 3 3 3 3 Long Gestation Period 10 years . Drug Drugstore Educational Services Electric Util. Furn.Auto Parts (OEM) Auto Parts (Replacement) Bank Bank (Canadian) Bank (Foreign) Bank (Midwest) Beverage (Alcoholic) Beverage (Soft Drink) Building Materials Cable TV Canadian Energy Cement & Aggregates Chemical (Basic) Chemical (Diversified) Chemical (Specialty) Coal/Alternate Energy Computer & Peripherals Computer Software & Svcs Copper Diversified Co./Home Furnishings Gold/Silver Mining Grocery Healthcare Info Systems Home Appliance Homebuilding Hotel/Gaming Household Products Industrial Services Insurance (Diversified) Insurance (Life) Insurance (Prop/Casualty) Internet Investment Co.

Railroad Recreation Restaurant Retail (Special Lines) Retail Building Supply Retail Store Securities Brokerage Semiconductor Semiconductor Cap Equip Shoe Steel (General) Steel (Integrated) Telecom. Leasing Utility (Foreign) Water Utility 10 5 10 3 5 10 5 10 10 3 5 5 5 10 5 5 5 3 3 5 5 2 2 2 2 2 5 5 3 5 5 10 5 5 2 5 5 3 5 10 10 .T.I.) Natural Gas (Distrib.E. Services Textile Thrift Tire & Rubber Tobacco Toiletries/Cosmetics Trucking/Transp. Equipment Telecom.Machinery Manuf.) Natural Gas (Diversified) Newspaper Office Equip & Supplies Oilfield Services/Equip. Housing/Rec Veh Maritime Medical Services Medical Supplies Metal Fabricating Metals & Mining (Div. Packaging & Container Paper & Forest Products Petroleum (Integrated) Petroleum (Producing) Precision Instrument Publishing R.

priate adjustments to operating income. net If in doubt. use the lookup table below he maximum allowed is ten years mined by the amortization period increase in operating income (add to reported EBIT) .

22 . 1 $ 156.12 ! PV of operating leases * Pre-tax cost of deb 662. use the ratings estimator From the current financial statements.00 Output Pre-tax Cost of Debt = 12.26 4 $ 109. ….00 $86.197.40 ! Commitment beyond year 6 converted into an annuity for ten years Debt Value of leases = $ 662.99 ! This is the interest-bearing debt reported on the balance sheet Number of years embedded in yr 6 estimate = 3 ! I use the average lease expense over the first five years to estimate the number of years of expenses in yr 6 Converting Operating Leases into debt Year Commitment Present Value 1 $ 156.00 6 and beyond $ 448.49 3 $ 122.00 4 $ 109.00 $68. enter the following Reported Operating Income (EBIT) = $17.00 $121.00 $113.527.00 $54.43 6 and beyond $ 149.00 ! This is the EBIT reported in the current income statement Reported Debt = $109.Operating Lease Converter Inputs Operating lease expense in current year = Operating Lease Commitments (From footnote to financials) Year Commitment ! Year 1 is next year.00 3 $ 122.66 5 $ 97.98 2 $ 143.22 Restated Financials Depreciation on Operating Lease Asset = Adjustment to Operating Earnings = Adjustment to Total Debt outstanding = $ $82.33 $200.78 ! I use straight line depreciation $81.00 5 $ 97.00 $138.25% ! If you do not have a cost of debt.00 2 $ 143.

nverter current income statement reported on the balance sheet over the first five years f expenses in yr 6 nnuity for ten years I use straight line depreciation PV of operating leases * Pre-tax cost of debt .

958 $459.67% ₩37.39% Return on capital = 12.812.00% ₩33.65 5% 41.67% ######### Growth RateReinvestment Rate FCFF Terminal value 0% 0.33% ₩30.33% ₩41.00% Cost of capital = 10.00% Reinvestment Rate = Terminal Value = 41.505 $441.278 $435.46 2% 16.EBIT (1 -t) = ######### Expected growth rate in perpetuity = 5.213.901.731 $449.47 1% 8.58 3% 25.90 4% 33.412 $489.67% ₩26.96 .686.00% ₩45.597.375.185 $472.

32% .73% 9.085. Working Capital = INR 2.085.16% 12.198 21.464.99% Return on Capital = 17.20 Adjusted EBIT = INR 25.00 Length of High Growth Period = Cap ex 8740 R$ 12.00 INR 6.805.00% 41.937 10 Forever Depreciation 5377 R$ 6.826 12.62% 174.227.732.291.20 INR 25.464.01% 5.00% 5.99% Marginal tax rate = 33.00 INR 62.835 R$ 31.00 Adjusted Capital Spending INR 40.479 BV of equity (start) 37019 R$ 44.464.450 R$ 41.53% 19.30% 25.868.054 R$ 79.293 R$ 97.094 R$ 51.00% EBIT (1-t) 14181 17796 23709 24477 33.00% Mature Market Equity Premium = 4.805.868.78% 34.999 R$ 34.998 R$ 65.00 Tax Rate on Income = 21.25% 9.850 R$ 7.395.464.00 Current Non-cash Working Capital = -INR 4.00 -INR 4.592 R$ 27.00 INR 78.51% 14.274 R$ 6.72% 140.56% 9.04% 21.227.509 R$ 170.80 Reinvestment Rate without acquisitions Riskfree rate = 5.737.701.28% 261.00 Invested Capital Adjusted Book Value of Debt = INR 62.70% 265.31% 9.20 1.50% 4.20 INR 25.535 R$ 121.99% BV of debt (start) 33621 R$ 27.00% Reinvestment Rate = 70.50% 3.701.92% Growth Rate = Beta used for stock = 1.00 Adjusted Depreciation & Amort'n = INR 8.00% 33.00 INR 40.602 R$ 63.00 Reinvestment Rate Lambda used for stock = 0.838 R$ 6.30% Reinvestment R$ 14.00% Chg in WC 5628 R$ 23.142 R$ 63.00% Cost of Debt = 12.00 INR 265.99% 33.209 R$ 4.80 0.Two-Stage FCFF Discount Model Input Summary Rupees Normalized EBIT (before adjustments) INR 25.50% Country Risk Premium = 4.00 INR 117.737.20 Revenues Adjusted Interest Expense = INR 6.588 R$ 52.67% Page 21 63.717 5546 R$ 20.00% Marginal tax rate = Current Revenues = 2005 2006 2007 2008 192792 231523 314044 342586 EBIT(Earnin Before Interest & Tax) 17950 22526 30011 30984 Pre-tax Oper Mgn 9.38% INR 265.089 R$ 62.00 INR 8.321 R$ 891 R$ 9.00 INR 2.00 ROIC Adjusted Book Value of Equity = INR 78.00% Tax Rate for computing income= 21.370 -R$ 20.96% 100.395.99% 33.00 Cash holdings Chg.422 Debt Ratio used in Cost of Capital Calculation= 25.493 104.804 Acquisitions 5844 R$ 1.732.00 Invested Capital INR 117.291.40% 167.

Two-Stage FCFF Discount Model Page 22 .

Working Capital INR 2.857.271.56 INR 9.66% 11.732.01% 12.00 -INR 490.4240 1.70 -INR 549.97 INR 28.01% 10.91 ########### ########### ########### -Chg.tax rate) INR 20.00% EBIT * (1 .67 -INR 689.21% 7.405.00% 229.01% Working Capital as percent of revenues = -1.00% 70.927 $7.009 $5.40 Cost of Capital 12.0201 2.00 INR 16.1250 1.42% 176.116.50% 12.50% 12.01% 12.62 INR 20.571.50% 12.00% Equity/(Debt+Equity ) = 74.62% 70.54% (in percent) The FCFF for the high growth phase are shown below (upto 10 years) Current 1 2 3 4 5 6 7 8 Expected Growth Rate 12.95 INR 18.00% 70.930 $5.759.59 -INR 679.01% 12.65 -INR 615.263.71 INR 22.590.01% 12.01% 125.00% Reinvestment Rate in Stable Phase = 41.205.99 INR 8.6020 1.30% Cost of Capital = 12.04% 213.67% FCFF in Stable Phase = INR 26.239.667.533.24 -INR 733.(CapEx-Depreciation) INR 31.70% After-tax Cost of debt = 8.63 Free Cashflow to Firm-INR 14.67% 53.61% 9.956 $5.05 ########### ########### ########### .80% Cumulated Growth 112.10 INR 10.47 -INR 764.50% 12.24% Cumulated Cost of Capital 1.33% 58.50% 12.90% Equity/ (Equity + Debt) = 74.8023 2.217.20 INR 25.500.472.653 Present Value Growth Rate in Stable Phase = 5.481.5091 $6.904 $6.00% Reinvestment Rate 70.Two-Stage FCFF Discount Model Output from the program Cost of Equity = 14.29 INR 6.70% AT Cost of Debt in Stable Phase = 5.2556 2.47% 140.99 INR 22.33% 195.641.99 INR 35.09% Debt/(Debt +Equity) = 25.62 ########### ########### ########### .96 Cost of Equity in Stable Phase = 11.411.94% Page 23 -INR 772.00% 64.602.982 $5.54% 157.2657 1.50% Intermediate Output Expected Growth Rate 12.96 INR 7.22 INR 25.08% 11.00% 70.852 $8.88 INR 31.

Reinvestment FCFF 1 22533 15773 6760 INR 665.99 Value of operating assets of the firm = INR 231.993.908.00 Market Value of Equity = INR 274.30% Cost of Capital in Stable Phase = 10.197.99 Minority Interest in consolidated holdings = INR 0.14 Value of Cash.581.332.914.07 Market Value of Equity/share in BR = Year EBIT (1-t) .98 Value of Firm = INR 383.13 Value of Equity in Options = INR 0.96 Valuation Present Value of FCFF in high growth phase = INR 72.812.12 Market Value of outstanding debt = INR 109.15 Present Value of Terminal Value of Firm = INR 159.00 Value of Equity in Common Stock = INR 274.710.710.07 2 25240 17668 7572 3 28272 19790 8482 4 31668 22168 9500 5 35472 24830 10642 Page 24 6 39236 25242 13994 7 42848 25138 17711 8 46192 24482 21710 9 49150 23264 25886 .39% Value at the end of growth phase = INR 489. Marketable Securities & Non-operating assets = INR 151.13 Market Value of Equity/share = INR 665.Two-Stage FCFF Discount Model Debt/ (Equity + Debt) = 25.

072 R$ 46.163 R$ 378.707 13.Two-Stage FCFF Discount Model 2009 Aggregate 747837 ########## 42684 R$ 144.882 R$ 157.50% R$ 99.74% 179.698 R$ 91.88% 33720 R$ 113.71% 7.658 R$ 316.848 R$ 88.22% 190.702 R$ 25.708 R$ 192.050 R$ 6.041 R$ 242.59% Page 25 .450 R$ 44.86% 261.692 R$ 553 R$ 12.639 R$ 217.450 R$ 57.220 262.371 R$ 650.91% 17.022 R$ 13.155 5.

Two-Stage FCFF Discount Model Page 26 .

32% 256.33% 41.0693 $9.67% Terminal Year ########### ########### ########### ########### ########### ########### -INR 600.310 $9.Two-Stage FCFF Discount Model 9 10 6.54% 47.81% 10.03 -INR 635.7804 3.56 -INR 499.808 Page 27 .40% 5.00% 244.39% 2.07 ########### ########### ########### 10.

Two-Stage FCFF Discount Model 10 51607 21503 30104 Page 28 .

00% 5. Adj.00% (volatility) 0.00% 2.85 1.05 Do not input any numbers below this line VALUING WARRANTS WHEN THERE IS DILUTION Stock Price= 780.23 413.85 # Shares outstanding= Adjusted S = 780.711.23 413 5.Bond rate= Adjusted K = 13.5 30.5 Annualized dividend yield= Div.58 $1.00% 0.50 $13.Valuing Options or Warrants Enter the current stock price = Enter the strike price on the option = Enter the expiration of the option = Enter the standard deviation in stock prices = Enter the annualized dividend yield on stock = Enter the treasury bond rate = Enter the number of warrants (options) outstanding = Enter the number of shares outstanding = $780.4306292 T.00% 5.85 Variance= Expiration (in years) = 1.36035409 1 d2 = N (d2) = 10.0900 0. interest rate= d1 = N (d1) = 11.71 2.5 # Warrants issued= Strike Price= 13.00% .99293063 1 Value per option = Value of all options outstanding = $767.

Bottom-up Beta Calculator Unlevered beta for sector = Output Firm's Current market value D/E ratio = Firm's Current tax rate = Bottom-up beta for firm = 1.99% 1.04 ! Look up industry averages 33.87% ! Reverted back to conventional debt to equity ratio 33.27 .

636363636 .debt to equity ratio 1.

999999 2 2.3 0.249999 A4.00% 0.5 9.75 1.999999 6 7.05 0.999999 3 3.5 1.5 2.5 0.4 0.60 Estimated Bond Rating = B+ Estimated Default Spread = 4.00% 8.737.00% 1.00 (Use only long term interest expense for fina Enter current long term government bond rate = 5.249999 CCC 1.199999 0.00% 3.5 1.00% 0.499999 0.25% For large manufacturing firms If interest coverage ratio is > ≤ to Rating is -100000 0.25% Estimated Cost of Debt = 9.799999 0.5 6.499999 2.25% 4.6 0.00% 12.8 1.799999 CC 0.25% 4.5 2.50% 1.00% 8.499999 4.2 1.50% 2.25 5.50% 1.749999 B 1.9999999 4 4.49999 BB+ 2. 3 if financial service firm) Enter current Earnings before interest and taxes (EBIT) = $17.899999 0.00 (Add back only long term interest expense fo Enter current interest expenses = $6.00% 10.75% 0.25% 4.199999 1.49999 2.499999 9.399999 0.5 5.50% 5.499999 A 5.649999 C 0.5 3.50% For smaller and riskier firms If interest coverage ratio is greater than ≤ to -100000 0.50% 5.499999 1.527.099999 0.2499999 BB 2.50 100000 AAA Spread is 15.8 1.75 0.50% 5.25 2.25% 4.999999 B+ 2 2.499999 A+ 6.9 1. 2 if smaller or riskier firm.50% 5.599999 0.99999 2 2.25 1.499999 3.00% 10.50% 2.25% 1.5 8.299999 0.049999 0.00% 1.999999 BBB 3 4.49999 1.75% 0.499999 AA 8.Inputs for synthetic rating estimation Enter the type of firm = 2 (Enter 1 if large manufacturing firm.00% 12.5 0.00% 3.50% Rating is D C CC CCC BB B+ BB BB+ BBB AA A+ AA AAA For financial service firms If long term interest coverage ratio is greater than ≤ to -100000 0.25 1.499999 0.5 12.249999 1.499999 B1.65 0.2 0.25% 1.99999 3 100000 .5 2.1 0.2 0.749999 0.00% Output Interest coverage ratio = 2.199999 D 0.499999 7.499999 12.5 1.5 100000 Spread is 15.

3 if financial service firm) Add back only long term interest expense for financial firms) Use only long term interest expense for financial firms) est coverage ratio is Rating is D C CC CCC BB B+ BB BB+ BBB AA A+ AA AAA Spread Operating is Income Decline 15.00% 1.25% 4.00% 8.50% 0.00% 5.00% 4.00% 10.50% 2.50% 1.20% 1.50% 6.90% 0.00% 3.15% 0.00% 12.00% 8.or riskier firm.00% 3.25% 4.00% 5.50% 1.00% 10.50% 5.25% 1.50% 2.50% 4.75% 0.00% 1.30% 1.70% .00% 15.

11% 46.85% 61.10 0.33 1.70 1.71 0.65 0.74% 26.10 0.90 Std Dev: Equity 80.39 0.15 1.26% 50.53% 69.77% 35.98% 14.18% 52.21% 44.11% 26.08 1.98% 21.96% 44.85% 27.83% 73.62% 23.18 1.61 0.26 1.84 0.30% 90.56 1.84 1.31 1.33% 34.38% 35.94 0.74 0. (Central) Electric Utility (East) Electric Utility (West) Electrical Equipment Electronics Entertainment Entertainment Tech Environmental Financial Svcs.23 1. Number of firms 30 66 44 53 20 54 477 8 39 41 108 52 25 12 19 33 88 18 322 125 113 342 54 34 24 26 16 83 173 84 33 79 296 109 18 10 34 14 29 14 32 68 26 31 167 34 35 78 208 17 Levered Beta 1.85% 27.41 0.14 1.92 1.78% 40.80 0. Drug E-Commerce Educational Services Electric Util.80 0.66 0.60 1.91% 33.50 1.14 1.43 1.49% 162.43 1.22 1.11% 88.27 0.49% 17.84% .99 1.38% 82.96% Market D/E 126.09% 39.04 1.79 1.24 1.93 0.07% 14.70% 35. (Div.13% 54.86 0.56% 43.95 1.47% 86.74% 48.75% 60.76 0.70% 29.70% 23.Industry Name Advertising Aerospace/Defense Air Transport Apparel Auto & Truck Auto Parts Bank Bank (Canadian) Bank (Midwest) Beverage Biotechnology Building Materials Cable TV Canadian Energy Chemical (Basic) Chemical (Diversified) Chemical (Specialty) Coal Computer Software/Svcs Computers/Peripherals Diversified Co.48 1.54 1.84% 37.82 0.42% 43.81% 21.81% 63.) Food Processing Food Wholesalers Foreign Electronics Furn/Home Furnishings Grocery Healthcare Information Heavy Construction Homebuilding Hotel/Gaming Household Products Human Resources Industrial Services Information Services Insurance (Life) Insurance (Prop/Cas.05 1.66 1.91% 19.15% 59.46% 68.36% 68.64% 57.66 0.41% 71.52% 10.77% 18.89 0.86% 261.50% 37.19% 62.75% 13.21% 18.54% 49.96% 48.92% 52.98% 103.20 1.31% 27.93% 50.25 1.02% 9.47% 57.80 0.84 0.36% 160.33 0.95 1.69% 47.44 1.79% 87.36 1.27 0.87 1.21% 78.) Internet Investment Co.50% 42.31% 79.31% 18.09 2.62% 79.47% 37.61% 49.39 1.45 0.51% 96.45 1.98% 19.28% 64.75% 25.71% 1.27 0.37 1.88% 21.99% 57.29 0.49 1.50 0.27 1.22 1.78 1.85 1.74 0.91 1.32% 183.76 1.17 0.56 0.98 1.16 1.29 1.65 0.26 1.23% 11.21 1.20 0.53% 45.40 0.43% 2.98 1.98 1.19% 91.75% 42.95 0.75% 94.15% 142.86 0.91% 44.50 0.51% 11.18 1.26% 50.04% 27.11 1.29% 65.09% 22.24% 70.25 1.73 1.49 0.02% 7.47 0.83 0.34% 43.83 Unlevered Beta 0.24% 18.89% 4.22 1.10 1.91 0.87% 9.22% 107.

33% 48.09 1.92 0.18% 64.01% 35.88% 11.41 1.63 1. Housing/RV Maritime Medical Services Medical Supplies Metal Fabricating Metals & Mining (Div.30 0.13 1.82% 82.08% 86.57 1.37% 24.52 0.00 1.69 1.32% 42.06 0.34 1.59 0.24 1.49 1.94 1.77% 22.93 28.66% 13.14% 31.08 1.09% 67.03% 75.20 1.94% 58.41% 45.54 1.47 1.33% 53.08 1.84% 38.26 1.53% 62.87% 58.97% 26.90% 46.55 1.16 1.81% .42% 57.21% 35.95% 57.46 0.36 1.27 0.) Natural Gas (Div.02 0.58% 11.10% 14.I.62% 29.T.38 0.80% 62.(Foreign) Machinery Manuf.79 0.88% 26.72 0.11 0.69% 51.32% 13.23 0.89 1.27 1.66% 32.57% 23.10 1. Packaging & Container Paper/Forest Products Petroleum (Integrated) Petroleum (Producing) Pharmacy Services Power Precious Metals Precision Instrument Property Management Publishing R.19% 41.41 0.35% 84.20 1.56 1.39 1.53 1. Equipment Telecom.23 1.35% 78.96 1.36% 36. Railroad Recreation Reinsurance Restaurant Retail (Special Lines) Retail Automotive Retail Building Supply Retail Store Securities Brokerage Semiconductor Semiconductor Equip Shoe Steel (General) Steel (Integrated) Telecom.59% 29.96% 12.87% 48.27% 13.07% 66.67% 37.31 1.91% 137.99 1.85 0.11 2.29% 462.32 1.71 0.81 0.42% 37.43% 60.66 0.79% 39.Investment Co.25% 59.38% 60.35% 30.37 2.86 1.25 1.71% 34.78 1.16% 55.90 1.96% 71.69 0.23% 24. Services Thrift Tobacco Toiletries/Cosmetics Trucking Utility (Foreign) Water Utility Wireless Networking Public/Private Equity Funeral Services Market 16 124 18 56 160 252 35 78 34 25 16 26 19 112 33 38 25 188 19 66 75 90 17 27 144 15 64 11 68 155 16 8 38 32 122 16 19 20 14 110 140 234 12 23 33 5 16 57 10 6 6870 1.66 0.28% 36.35% 39.81 0.85% 28.24 0.48 1.44% 21.71 1.84 0.97 0.13% 185.E.35 1.77% 50.53 1.56 1.65% 282.71% 8.30 1.90% 48.71% 51.20% 43.43 0.27% 30.50% 126.48 0.66% 47.07% 82.52% 30.93 0.57% 5.33% 86.83% 118.13% 53.28% 25.26 1.37 1.30% 51.28 0.75% 22.54 2.01 1.22 0.50% 107.17 1.70% 38.69 0.62% 3.96% 32.93% 56.57% 85.91 1.86 0.15% 67.) Natural Gas Utility Newspaper Office Equip/Supplies Oil/Gas Distribution Oilfield Svcs/Equip.39 1.95 1.67% 37.95% 42.19 1.87 1.64 1.25% 49.37 1.85 0.84% 72.65% 25.17 1.00% 97.69 1.37% 391.41 1.32% 44.81 1.38 1.25% 48.43 0.31 1.32% 9.73% 54.35% 81.20 0.79% 36.82% 40.62 0.01 1.01 1.86 0.34% 39.95 1.15% 35.

45% 18.44% 22.98% 21.44% 25.93% 12.39% 30.47% 18.96% 23.00% 26.12% 26.59% 17.57% 23.97% 29.34% 18.17% 10.24% 5.19% 17.91% 20.82% 19.09% 14.55% 17.67% 12.98% 4.54% 46.85% 3.98% 9.08% -5.30% 12.64% 11.77% 16.58% 43.88% 42.98% 13.52% 31.91% 14.21% 24.46% 13.55% 21.68% 12.92% ROE 21.47% 21.50% 47.61% 25.17% 13.38% 85.82% 10.96% 13.71% 64.67% 17.81% 16.93% 21.57% 12.23% 10.05% 24.55% 30.59% 18.14% 29.36% 19.50% 10.35% 21.Market Debt/Capital 55.87% 17.76% 47.51% 5.83% 17.80% 33.38% 15.67% 61.30% 19.85% 17.91% 12.08% 18.66% 13.33% 26.81% NA NA NA 18.18% 21.00% 17.28% 11.84% 10.67% 27.82% 15.78% 18.69% 11.26% 6.93% 21.51% 13.69% 18.10% 17.81% 21.08% 50.56% 19.86% 25.69% 17.03% 7.49% 49.26% 7.79% 14.00% 20.20% NA NA 26.89% 11.39% 43.66% 15.13% 36.58% 8.53% 22.36% 21.00% Pre-tax Operating Margin 17.31% 22.67% 12.84% 1.04% 34.39% 40.89% 30.66% 5.68% 11.44% 25.98% 14.18% 51.10% 23.90% 24.47% 34.72% 39.87% 20.54% 25.05% 31.80% 21.29% 25.30% 29.10% 21.08% 26.98% 15.86% 20.95% 17.76% 48.15% 12.85% 22.78% 11.30% 47.38% 10.73% ROC Effective Tax Rate 13.16% 13.05% -63.33% 26.50% 0.89% 24.23% 11.75% 7.51% 11.02% 32.44% 7.60% 647.26% 20.65% 9.76% 21.63% 8.05% 19.01% 9.98% 5.33% 15.91% 25.52% 20.91% 20.47% 14.87% 29.96% 47.21% 10.85% 58.85% 24.05% 18.93% 20.41% 40.26% 2.85% 85.33% 32.46% 3.58% 23.35% 33.13% 17.61% 22.33% 44.10% 7.23% NA .09% 30.90% 13.21% 15.57% 12.62% 16.27% 72.35% 19.96% 16.97% 27.45% 17.90% 20.46% NA 18.67% 10.99% 10.75% 3.64% 14.19% 24.00% 18.84% 15.09% 20.23% 5.34% 14.91% 15.51% 61.50% 13.52% 12.88% 13.83% 25.07% 26.98% -16.01% 37.64% 17.31% 13.65% NA NA NA 20.39% 37.04% 23.45% -23.79% 22.26% NA NA 19.35% 10.87% 14.74% 32.64% 32.38% 24.04% 20.21% 16.10% 48.96% 10.03% 26.77% 19.67% 15.36% 12.01% 19.99% 32.16% 22.67% 16.79% 9.

15% 22.98% 21.34% 21.94% 15.04% 20.21% 6.34% 11.4.48% 22.36% 12.28% 33.91% 14.61% 23.41% 12.10% 23.67% 17.96% 35.95% 24.86% 14.80% NA 9.93% 33.90% 9.62% 19.80% 16.90% 10.83% 30.64% 23.68% 40.08% 15.90% 17.77% .12% 14.80% 55.03% 13.36% 37.16% 10.67% NA 13.46% 11.12% 25.63% 7.31% 19.72% 20.17% 11.53% 14.65% 13.24% 17.11% 22.68% 22.51% 8.59% 6.08% 20.51% 17.87% 20.17% 21.41% 5.01% 30.75% 11.99% 19.35% 9.29% 40.77% 21.98% 20.04% 46.68% 12.94% 46.02% NA 22.28% 17.06% 11.15% 29.47% 73.71% 8.67% 9.12% 8.92% 19.14% 16.34% 38.05% 3.53% 22.17% 22.26% 9.01% 35.76% 9.28% 15.18% 6.18% 32.64% 40.49% 17.12% 8.22% NA 32.24% 26.10% 22.07% 24.56% 23.64% NA 17.71% 14.15% 12.97% 39.04% 20.35% 28.98% 7.58% 45.67% 17.89% 0.07% 19.08% 6.89% -11.83% 34.03% 20.98% 3.72% 11.75% 26.39% 65.72% 15.00% 35.37% 16.11% 31.67% 79.99% 36.58% 22.94% 14.85% 23.96% 19.78% 13.75% 45.41% 18.91% 8.37% 6.69% 70.27% 20.81% 25.09% 32.13% 6.43% 98.31% 35.53% 18.11% 12.85% 17.02% 11.82% 20.69% 11.67% 29.25% 20.80% 10.72% 3.19% 15.08% 12.81% 11.80% 33.47% 12.21% 25.32% 15.66% 12.34% 39.38% 19.03% 16.46% 23.31% 12.10% 15.39% 12.90% 12.11% 10.82% 15.21% 32.18% 18.03% 51.29% 26.21% 30.28% 33.40% 27.08% 18.36% 13.21% 19.38% 11.46% 21.43% 9.65% 11.79% 27.57% 6.79% 13.95% 15.85% 15.51% 20.75% 11.36% 13.41% 26.52% 12.70% 23.04% 29.52% 23.69% 20.49% 13.26% 18.45% 18.28% 53.12% 27.26% 16.19% 24.21% 15.21% 9.73% 23.25% 23.58% -66.76% 9.73% 1.73% 2.23% 28.04% 29.08% 34.70% 33.64% 45.65% 36.72% 29.19% 15.56% NA 16.29% 20.33% 27.91% 38.90% 35.22% 11.03% 3.25% 5.90% 54.66% 33.88% 57.93% 8.95% 27.46% 14.00% 34.75% 12.53% 24.25% 82.62% 15.48% 22.41% 12.91% 28.35% 29.38% 8.37% 28.54% 19.29% 24.03% 30.96% 38.50% 17.53% 18.06% 14.81% 20.85% 8.54% 16.90% 19.49% 10.

92% -2.58% 5.87% 0.34% 118.21% 3.71% 10.75% 72.77% -3.37% 19.90% 10.60% 6.23% -10.06% 7.96% 5.16% 5.64% 1.76% 17.86% 61.17% 57.42% 5.03% 3.95% 36.43% 7.35% -0.27% 6.84% 99.16% -0.44% 218.58% 123.57% 0.84% -12.69% 109.98% 133.29% 0.26% 15.71% 6.48% -14.77% 13.58% 7.52% 24.25% NA .61% 15.53% 91.94% 8.91% 158.55% 2.71% 84.72% NA NA 13.64% -10.16% -6.59% 8.53% NA Cap Ex/ Depreciation 66.63% 31.After-tax Operating Margin 11.79% 9.33% 20.29% 192725.01% 19.00% -0.68% -0.96% -1.88% 330.04% 3.38% 5.04% 18.24% 16.73% NA NA NA 115.72% 4.26% 6.99% 1.27% 14.58% 1.13% -0.61% 142.65% 11.61% -8.43% 1.14% 12.17% 12.51% 19.22% 90.56% NA NA NA 14.63% 3.26% 5.93% 22.67% 17.15% 9.92% NA NA 6.97% 14.55% 4.60% 2.62% 20.66% -1.88% 122.82% 34.34% 126.71% 17.83% 14.33% 8.97% 206.48% -22.60% 0.79% 211.07% 6.79% 2.00% 84.78% -4.83% NA Payout Ratio 7.73% 20.64% NA NA -6.27% 130.35% 11.30% 11.48% 28.75% 17.65% 29.72% 146.25% 106.88% -1.38% 3.39% -7.23% 3.49% 28.64% 4.15% -0.42% 76.17% 6.06% 66.40% 109.10% -6.71% 94.31% 31.78% -2.86% 102.40% 5.61% 28.55% 122.89% 115.57% -5.69% 0.15% 0.20% 2.84% 3.42% 8.75% 6.65% 8.85% -16.45% 16.81% 14.75% 54.90% 1.78% 11.94% 1.96% 1.34% 3.00% 5.77% 13.33% 2.69% 4.61% 4.31% 8.63% 95.18% 7.79% 25.77% 8.61% 141.57% -0.42% 9.37% 11.33% 5.14% 6.16% 3.44% NA NA NA 5.24% 8.95% 8.48% 6.47% 21.00% 0.50% 12.17% 89.35% 14.24% 10.45% 3.20% NA Reinvestment Rate -1.07% -11.10% -4.31% 11.47% -9.47% 23.00% Non-cash WC/ Revenues -15.43% -612.37% -0.47% 3.28% 9.69% -6.12% 25.05% 10.27% 146.64% 23.59% 3.69% 14.90% 0.26% 98.55% 51.40% 3.73% 165.36% 15.50% -6.88% 11.20% 0.11% 22.17% 2.85% 8.49% 3.14% 4.76% 11.16% 13.48% 5.07% 46.05% 13.49% -1.28% 218.94% NA Net Margin 2.69% 91.78% 17.53% 8.85% 134.75% 15.65% -0.15% 7.26% 3.38% 0.20% 2.83% NA 10.49% 14.12% 87.67% 81.83% 8.79% 7.03% 5.55% 13.57% 0.98% 0.75% 7.53% 13.77% 13.33% 3.75% -5.48% 6.84% 11.24% 3.51% 11.95% -2.67% 1.58% NA 52.01% 128.48% -4.91% NA 22.69% 5.14% 9.75% 16.36% -6.39% 5.73% -7.00% 38706.48% 5.00% 1.42% 258.16% 4.32% 5.81% 139.69% 94.00% 0.29% 4.90% NA NA NA 5.

95% 0.31% 10.60% 190.94% 18.16% 32.49% 0.45% NA 3.96% 3.31% 7.68% 95.61% 21.75% 10.78% 170.33% 15.NA 9.63% 12.33% 23.11% 0.19% 7.13% 12.52% 42.17% 3.30% 0.05% 9.08% 20.32% 4.72% 8.22% 25.09% 242.73% 95.66% 39.06% 1.22% 2.39% 8.59% 27.15% 1.45% 12.91% 33.60% 2.62% NA 13.72% 10.53% 120.06% 6.88% 94.35% -4.82% 1.70% 1.72% -3.36% 373.97% 15.68% 233.38% NA 6.02% 21.29% 0.37% 29.04% 5.99% 10.15% 124.10% 1.94% 5.29% -1.52% 22.66% 116.49% 10.26% 2.48% 163.11% 4.29% 14.31% 4.01% 11.24% 4.40% 4.39% 28.90% 2.33% 8.59% 10.53% 202.00% 274.21% 134.11% -0.97% 17.99% 1.56% -1.36% -8.96% 15.23% 166.09% 8.35% 251.73% 1.15% 135.42% -13.33% 6.18% 9.18% -6.82% 5.47% 51.71% 7.00% 14.70% 5.06% 0.19% NA 178.17% -4.44% 84.36% 16.49% NA 4.67% 2.62% 186.95% 4.71% 5.84% 5.61% 13.93% 11.96% 0.22% -1.25% 10.04% 10.25% 8.89% 5.20% 0.97% 9.25% -10.47% 25.87% 1.77% 0.95% 81.46% 14.32% 2.18% 28.11% 64.79% 12.49% 2.75% 47.65% 2.98% 291.56% 71.96% 23.78% 8.63% 47.18% 230.21% 9.33% -0.06% 12.55% 11.60% 24.75% -14.70% 5.75% 195.54% 10.81% -3.05% 17.66% 10.01% 3.87% 201.89% 9.80% 5.07% 1.45% 26.07% 36.41% 10.27% 4.41% 2.28% 82.10% 21.86% 15.37% 2.67% 12.12% -4.69% 607.06% 21.54% 5.74% 90.50% 5.02% 1.85% NA 0.09% 16.41% 89.00% 3.53% 8.74% 4.33% 523.17% 69.13% 6.60% 15.96% 11.86% 5.00% 18.61% NA 3.55% -1.27% 16.70% 6.43% 6.90% .63% 3.14% 5.70% -30.30% 2.11% 6.56% 682.55% -5.80% 30.04% 242.41% 8.02% 71.81% 3.04% -7.50% 9.18% 1.90% NA 16.24% 1.16% 14.73% 262.92% 14.54% 9.06% 4.65% 281.41% 422.90% 80.23% 117.62% 12.28% 140.94% 9.89% 18.92% 12.14% 23.53% 158.47% 98.12% 10.14% 9.04% 0.51% 9.36% 5.97% 8.19% 51.53% 146.00% 13.19% 19.11% 6.57% 1.43% 4.30% 12.60% 187.42% 22.35% 13.91% 50.83% 20.38% 3.96% 14.02% 10.40% -1.55% 83.86% 4.47% 25.15% 14.16% 6.62% 28.53% 23.49% -1.15% 608.96% 0.00% 190.24% 19.65% 10.73% 0.72% 143.16% 8.80% NA -5.61% 115.13% NA 331.76% 110.26% 1.97% 0.85% 21.67% 0.62% 1.30% 146.69% 4.44% 8.13% -17.66% 7.62% 16.43% 2.46% 17.74% 23.68% 4.66% 6.57% 13.30% 61.86% -3.42% -32.83% 16.96% 9.42% 268.68% 6.33% 197.56% 139.33% 24.

65 1.05 0.57 1.68 NA NA 2.43 4.60 1.90 2.90 NA EV/Sales 0.24 2.00 1.93 1.01 0.Sales/Capital 1.82 3.08 0.70 0.42 0.68 0.35 1.90 1.27 1.84 1.56 0.99 1.88 1.32 0.36 0.22 NA .51 0.26 1.65 0.88 1.93 0.73 6.36 3.79 2.61 0.29 NA NA NA 1.27 0.09 2.02 0.58 1.96 1.75 0.71 0.67 1.74 4.86 2.50 2.32 0.77 2.84 1.08 0.67 2.56 1.16 1.55 1.49 0.92 NA NA NA 1.12 5.75 1.01 0.71 1.20 1.94 0.32 1.85 2.28 2.63 1.20 1.80 1.45 0.00 0.29 0.12 3.79 2.87 1.64 0.15 0.99 5.96 2.44 NA NA 1.85 1.70 1.73 0.70 1.71 1.23 0.97 4.

96 0.59 0.90 1.08 0.21 NA 0.69 NA 1.63 1.74 0.99 0.92 2.98 0.90 2.01 1.16 0.55 0.04 1.47 0.80 2.35 1.23 0.78 NA 4.NA 1.54 1.28 .95 0.35 2.16 NA 1.72 0.81 3.72 3.44 3.90 1.29 0.75 0.89 1.59 1.37 2.95 1.48 1.52 1.50 0.12 0.81 0.49 2.89 2.45 0.33 0.74 2.40 0.28 0.70 1.42 2.31 0.60 1.03 1.60 1.56 1.70 2.47 0.68 0.59 1.53 0.40 1.57 0.30 1.36 1.70 0.31 0.09 1.09 1.72 0.17 2.82 1.90 NA 1.05 0.40 0.14 0.84 0.05 2.90 0.00 1.68 3.36 1.89 4.24 2.38 2.09 2.65 1.24 0.09 0.88 0.92 0.72 0.54 4.90 3.70 2.36 4.