Target Corporation - Equity Value and Enterprise Value

($ in Millions Except Per Share Data)

Target Corporation - Equity Value Calculation: Diluted Shares Calculations:

Company Name: Target Corporation Options - Treasury Stock Method:

Ticker: NYSE:TGT
Valuation Date: 2020-03-20 Number Exercise
Current Share Price: $ 97.40 Name: (Millions): Price: Dilution:
Basic Shares Outstanding (Millions): 501.0 Tranche A: 0.714 $ 56.02 0.303
Diluted Shares Outstanding (Millions): 509.2 Total: 0.714 0.303
Effective Tax Rate: 22.0%
Performance Shares:
Basic Equity Value: $ 48,794
Number Exercise
Diluted Equity Value: $ 49,592 Name: (Millions): Price: Dilution:
(-) Cash & Cash-Equivalents: (2,577) Performance Share Units: 3.575 3.575
(-) Financial Investments: - Total: 3.575 3.575
(-) Equity Investments: -
(-) Other Non-Core Assets: - Restricted Stock Units (RSUs) and Other Sources:
(-) Net Operating Losses: -
(+) Total Debt: 12,001 Number Exercise
(+) Preferred Stock: - Name: (Millions): Price: Dilution:
(+) Operating Leases: - Restricted Stock Units (RSUs): 4.316 4.316
(+) Noncontrolling Interests: - Total: 4.316 4.316###
(+) Unfunded Pensions: 91
(+) Capital Leases: 1,370
Enterprise Value (TEV): $ 60,477

Lesson Notes - Target:

Fairly simple financial statements, so most of these items can come directly from the statements. Can take Cash, Investments, etc. directly from the
Balance Sheet, and the company has no significant partial stakes in other companies (i.e., no Equity Investments or Noncontrolling Interests).

Also, no Preferred Stock, NOLs, etc. (can confirm by checking the contents of the Deferred Tax Asset).

Trickiest Bit: They have various types of Debt, and they disclose the fair market values for some, but not all, of it - so, we need to split up the Debt
into Long-Term vs. Short-Term and actual Debt vs. Capital Leases and take the fair market value where possible (only for the LT Portion).

Why the Difference: Interest rates have fallen since the company issued this Debt, so its fair value is now higher --> interest rates on similar
issuances are now lower --> worse options elsewhere --> lower Discount Rate.

Pensions: We *only* count the Unfunded Portion of pensions. These represent "another investor group" because the employees act as the investor
group - they provide the company with funding by accepting lower pay today in exchange for pension payments later on.

Contributions into U.S. pension plans are tax-deductible, so we multiply by (1 - Tax Rate) here; treatment in other countries varies widely.

Leases: We'll get into this in more detail in the lesson dedicated to Leases (#13), but in short, counting Operating Leases as Debt for companies
that use U.S. GAAP is problematic because it means that certain metrics, such as EBITDA, will not be valid later on. So, we choose not to count them
for Target or Zendesk, even though they are on-Balance Sheet from 2019 onward.

Truth: If you think about it, Operating Leases are not really "another investor group" - yes, there are fixed payments, but it's not as if the company
can "raise" an Operating Lease to pay for an acquisition, hire employees, etc.
Vivendi SA - Equity Value and Enterprise Value
(€ in Millions Except Per Share Data)

Vivendi SA - Equity Value Calculation: Diluted Shares Calculations:

Company Name: Vivendi SA Options - Treasury Stock Method:

Ticker: ENXTPA:VIV
Valuation Date: 2020-03-20 Number Exercise
Current Share Price: € 19.36 Name: (Millions): Price: Dilution:
Basic Shares Outstanding (Millions): 1,170.6 Under €15 0.801 € 11.90 0.309
Diluted Shares Outstanding (Millions): 1,171.3 €15 to €16 1.210 € 15.80 0.223
Effective Tax Rate: 24.0% €16 to €17 0.014 € 16.70 0.002
€17 to €18 1.053 € 17.20 0.117
Basic Equity Value: € 22,663 More than €18 - € - -
Total: 3.078 0.651
Diluted Equity Value: € 22,675
(-) Cash & Cash-Equivalents: (2,130) Performance Shares:
(-) Financial Investments: (2,518)
(-) Equity Investments: (3,520) Number Exercise
(-) Other Non-Core Assets: - Name: (Millions): Price: Dilution:
(-) Net Operating Losses: - Performance Shares: - -
(+) Total Debt: 7,051 Total: - -
(+) Preferred Stock: -
(+) Operating Leases: 1,459
(+) Noncontrolling Interests: 222 Restricted Stock Units (RSUs) and Other Sources:
(+) Unfunded Pensions: 807 ###
(+) Capital Leases: - Number Exercise
Enterprise Value (TEV): € 24,046 Name: (Millions): Price: Dilution:
Restricted Stock Units (RSUs):
Total: - -

Lesson Notes - Vivendi:

More complex statements, but a lot of these items can still be taken directly from them. In fact, VIV does not even disclose the fair market value of many
items, so we can't do much better by scouring the filings for information.

Cash, Financial, and Equity Investments: Can all come directly from the Balance Sheet; Equity Investment FMV often differs, but companies rarely
disclose the exact amount, especially for small stakes.

No non-core assets or NOLs if you look through the tax sections; non-core assets might be used for Discontinued Operations or similar segments, if
the company has certain assets now but plans to sell them.

Total Debt: The company does not disclose the fair value of everything, so all we can do is use the Balance Sheet number (book value) and then make
a small market value adjustment for part of this - same issue, that Interest Rates have fallen since the original issuance.

Noncontrolling Interests (NCI): Take it from the BS; very small, anyway, so not that significant. Logic is that if a parent company owns over 50% of
another company, such as 70%, the 30% it does *not* own acts as another "investor group" because the parent company can draw on its resources.

Unfunded Pensions: Take the number directly from the disclosures - assumption here is that since this is a European (French) company, contributions
into the plan are NOT tax-deductible, though we don't know for sure (complicated since it's an international conglomerate).

Operating Leases: Yes, we have to count them as a Debt-like item here… why? Short answer is that under IFRS, companies record the lease expense
in separate components - Interest and Depreciation - on the Income Statement. So, metrics such as EBITDA already exclude the entire lease expense.

Therefore, we must *add* the corresponding Balance Sheet line item to Enterprise Value for use in multiples such as TEV / EBITDA. We don't have
this same problem under U.S. GAAP because it's still shown as a Rental/Lease expense on the IS under Operating Expenses.
Zendesk Inc - Equity Value and Enterprise Value
($ in Millions Except Per Share Data)

Zendesk Inc - Equity Value Calculation: Diluted Shares Calculations:

Company Name: Zendesk Inc Options - Treasury Stock Method:

Ticker: NYSE:ZEN
Valuation Date: 2020-03-20 Number Exercise
Current Share Price: $ 56.88 Name: (Millions): Price: Dilution:
Basic Shares Outstanding (Millions): 113.4 Tranche A: 3.661 $ 18.30 2.483
Diluted Shares Outstanding (Millions): 121.2 Total: 3.661 2.483
Effective Tax Rate: 22.0%
Performance Shares:
Basic Equity Value: $ 6,447
Number Exercise
Diluted Equity Value: $ 6,894 Name: (Millions): Price: Dilution:
(-) Cash & Cash-Equivalents: (197) Performance Share Units: - -
(-) Financial Investments: (649) Total: - -
(-) Equity Investments: -
(-) Other Non-Core Assets: - Restricted Stock Units (RSUs) and Other Sources:
(-) Net Operating Losses: (230)
(+) Total Debt: 793 Number Exercise
(+) Preferred Stock: - Name: (Millions): Price: Dilution:
(+) Operating Leases: - Restricted Stock Units (RSUs): 5.361 5.361
(+) Noncontrolling Interests: - Total: 5.361 5.361###
(+) Unfunded Pensions: -
(+) Capital Leases: - Convertible Bonds and Hedged Convertibles:
Enterprise Value (TEV): $ 6,611
Convertible Bond Principal Amount ($ in Millions): $ 575.0
Conversion Price ($ as Stated): $ 63.07
Potential Dilutive Shares (# Millions): 9.117
Actual Dilutive Shares: -

Capped Calls - # Call Options Purchased: 9.117

Capped Calls - Exercise Price of Call Options: $ 63.07

Number Exercise
Name: (Millions): Price: Dilution:
Capped Calls - Sold Warrants: 9.117 $ 95.20 -
Total: 9.117 -

Net Dilution from Convertible Bonds and Hedges: -

Lesson Notes - Zendesk:

Very similar to Target - not much to say for most of these items, as the company's capital structure is quite simple. Take Cash and Investments from the
Balance Sheet, the same as usual, and no partial stakes in other companies to worry about. Just two points:

1) Net Operating Losses - Zendesk is losing massive amounts of money, so we need to include these, found in the Deferred Tax Asset/Liability disclosure
section. The logic is that NOLs are "non-core" or "non-operating" since they are not required to run the business and don't just flow through the statements
automatically like tax credits and some other items do - only used if the company actually reaches positive Pre-Tax Income and can apply them.

Also, they make some companies worth more to acquirers, but this varies heavily based on deal type and region.

We SHOULD adjust for the Valuation Allowance here as well, but that is a more advanced topic that we'll cover in lesson #14.

2) Total Debt - Company's only Debt is the Convertible Bond… so, do we count it or not? Need to check the dilution status. If there are no shares, yes,
count it as Debt, but use the fair value of $793 million because of the same issue with widely divergent Interest Rates and rates falling since the issuance.