FCFF VALUATION MODELBefore 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 doesThis 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:

financial statements, and review and change the inputs for the valuation.

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 inputsfor 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 spreadsheet1. 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.

1. The bulk of the inputs are in the master inputs page. Here, you can input the numbers from the current

2. If you want to normalized operating income, use the earnings normalizer worksheet.

FCFF VALUATION MODELThe spreadsheet has circular reasoning. This is not a problem. Go into calculation options (in excel) and check

This model is designed to value firms with operating income that is either positive or can be normalized to bepositive. It allows for up to 15 years of high growth, and can be used either as a 2-stage or a 3-stage model.

3. If you have R&D or operating leases, you will need to input the required numbers in those worksheets.

The spreadsheet can be used to value a company, with fixed inputs for a high growth phase and different inputsfor 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

1. Bottom-up beta estimator: will estimate your levered beta, given an unlevered beta (which you will have to

2. Industry averages: Here, you can look up industry averages for variables such as beta, return 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 choose the appropriate option, though.If you have negative operating income, you will either have to normalize it to make it positive, or use the highgrowth.xls spreadsheet.

Master Input SheetDo you want to capitalize R&D expenses? No ! Yes or No Go to R&D ConverterDo you want to convert operating leases to debt? No ! Yes or No Go to Operating lease converterDo you want to normalize operating income? Yes Go to Earnings Normalizer

InputsFrom Current FinancialsCurrent EBIT = ### ! If negative, go back and choose to normalize earnings.Current Interest Expense = INR 6,737.00Current Capital Spending ###Current Depreciation & Amort'n = INR 8,701.00Tax rate (for computing after-tax operating income) = 21.00%Marginal tax rate = 33.99% Previous year-endCurrent Revenues = ### ###Current Non-cash Working Capital = -INR 4,085.00Chg. Working Capital = INR 2,732.00Previous year-endBook Value of Debt = ### ###Book Value of Equity = ### ###

Cash & Marketable Securities = ### ###

Value of Non-operating Assets = ### ###Minority Interests (this is a liability) = INR 0.00

Price to Book Ratio of sector with minority holdings = 2.10Market Data for your firmIs your stock currently traded? Yes Average maturity of debt =If yes, enter the following:Current Stock Price = INR 780.50Number of shares outstanding = 413.05Market Value of Debt = ###If no, enter the followingWould you like to use the book value debt ratio? NoIf no, enter the debt ratio to use in valuation 35%

General Market DataLong Term Treasury bond rate= 5.00%Mature Market Equity Premium = 4.50%Country Equity Risk Premium = 4.50%Exchange Rate for fiscal year items (BR/$) = R$ 1.00 R$ 1.00Exchange Rate for currrent price conversions = R$ 1.00RatingsDo you want to estimate the firm's synthetic rating = No ! If yes, use the rating estimator worksheet that is attachedIf yes, choose the type of firm 2If not, what is the current rating of the firm? B+Enter the cost of debt associated with the rating = 12.25%

OptionsDo you have equity options (management options, warrants) outstanding? NoIf yes, enter the number of options 2.23Average 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 InputsHigh Growth PeriodLength of high growth period = 10Beta to use for high growth period for your firm= 1.2Lambda to use for your firm (for both high growth and stable growth) = 0.8Do you want to keep the debt ratio computed from your inputs? YesIf 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 period7.00%Do you want to keep the existing ratio of working capital to revenue? YesIf 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? yesIf no, enter the expected growth rate in operating income for high growth period12%If yes, the inputs to the fundamental growth calculation (based upon your inputs) areReturn on Capital = 17.16%Reinvestment Rate = 170.61%Do you want to change these inputs? YesReturn 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 PeriodGrowth rate during stable growth period = 5.00%Beta to use in stable growth period = 1.00Country 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 optionsDo you want to compute reinvestment needs in stable growth based on fundamentals?YesIf 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% (in percent)

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

Go to R&D ConverterGo to Operating lease converterGo to Earnings Normalizer

! If negative, go back and choose to normalize earnings.

0.14508

0.13074

Average maturity of debt = 3

! If yes, use the rating estimator worksheet that is attached

2005 2006 2007 2008 2009 AggregateRevenues 192792 231523 314044 342586 747837 ###EBIT 17950 22526 30011 30984 42684 R$ 144,155Pre-tax Oper Mgn 9.31% 9.73% 9.56% 9.04% 5.71% 7.88%

EBIT (1-t) 14181 17796 23709 24477 33720 R$ 113,882BV of debt (start) 33621 R$ 27,142 R$ 63,293 R$ 97,479 R$ 157,163 R$ 378,698BV of equity (start) 37019 R$ 44,602 R$ 63,054 R$ 79,717 R$ 91,658 R$ 316,050Cash holdings 5546 R$ 20,209 R$ 4,838 R$ 6,998 R$ 6,450 R$ 44,041Invested Capital R$ 65,094 R$ 51,535 R$ 121,509 R$ 170,198 R$ 242,371 R$ 650,707ROIC 21.78% 34.53% 19.51% 14.38% 13.91% 17.50%

Cap ex 8740 R$ 12,592 R$ 27,588 R$ 52,804 R$ 99,708 R$ 192,692Acquisitions 5844 R$ 1,321 R$ 891 R$ 9,937 R$ 553 R$ 12,702Depreciation 5377 R$ 6,274 R$ 6,850 R$ 7,826 R$ 25,072 R$ 46,022Chg in WC 5628 R$ 23,450 R$ 41,370 -R$ 20,422 R$ 13,450 R$ 57,848Reinvestment R$ 14,835 R$ 31,089 R$ 62,999 R$ 34,493 R$ 88,639 R$ 217,220Reinvestment Rate 104.62% 174.70% 265.72% 140.92% 262.86% 190.74%Reinvestment Rate without acquisitions63.40% 167.28% 261.96% 100.32% 261.22% 179.59%

Investment Number of unitsBook Value (in millions)Current market priceMarket Value (in millions)a. Investments with market valueTata Steel 21440882 2699 633 13572.08Tata Chemicals 70249 2.4 346 24.30615

Total 2701.4 13596.38

b. Investments without quoted market priceAll other investments ### NA ###

Business Revenues EV/Sales Value Value WeightUnlevered betaShipbuilding 8341 3.23 26941 63.73% 1.60Offshore & Engineering 2563 1.97 5049 11.94% 1.44Industrial plant 1200 1.55 1860 4.40% 1.29Engine and Machinery 2252 1.36 3063 7.24% 1.21Electro Electric System 1753 1.8 3155 7.46% 1.19Construction Equipment 1823 1.21 2206 5.22% 1.29

42274 100.00% 1.49

Normalizing EarningsApproach used to normalize earnings = 3

If historical average,Average Earnings before taxes = INR 19,738

If historical average ROC,Historical average pre-tax return on capital = 22%

If sector marginPre-tax Operating Margin for Sector = 7.04% ! Look at industry average

Normalized Earnings before interest and taxes = $25,464.20

Worksheet for normalization (Last 5 years of data)-5 -4 -3 -2 -1 Total

Revenues INR 206,487 INR 242,905 INR 320,648 INR 335,771 INR 295,252 ###EBT INR 16,519 INR 20,534 INR 25,732 INR 25,765 INR 10,138 INR 98,688EBT Margin 8.00% 8.45% 8.02% 7.67% 3.43% 7.04%

Net Cap ex 282 -112 -27 151.76 196.02 490.78Non-cash WC 26.07 305.82 915.03 -222.74 1502.9 2527.08

Inventory 367.38 682.72 1281.06 1121.56 2371.09Accounts Rec 74.48 149.74 537.37 314.02 1386.19Other Current assets 34.23 57.17 174.73 291.92 474.46Accounts Payable 190.06 248.98 358.23 521.17 615.72Other Current Liabilities 259.96 334.83 719.9 1429.07 2113.12

Net Cap ex as % of EBIT (1-t) 0.75%Non-cash WC as % of Revenue 0.18%

Normalized reinvestment = $39.62

###

R & D ConverterThis spreadsheet converts R&D expenses from operating to capital expenses. It makes the appropriate adjustments to operating income, netincome, the book value of assets and the book value of equity.

InputsOver how many years do you want to amortize R&D expenses 5 ! If in doubt, use the lookup table belowEnter the current year's R&D expense = $1,594.00 The maximum allowed is ten yearsEnter R& D expenses for past years: the number of years that you will need to enter will be determined by the amortization periodDo not input numbers in the first column (Year). It will get automatically updated based on the input above.

Year R& D Expenses-1 1026.00 ! Year -1 is the year prior to the current year-2 698.00 ! Year -2 is the two years prior to the current year-3 399.00-4 211.00-5 89.0000000

OutputYear R&D Expense Unamortized portion Amortization this year

Current 1594.00 1.00 1594.00-1 1026.00 0.80 820.80 $205.20 -2 698.00 0.60 418.80 $139.60 -3 399.00 0.40 159.60 $79.80 -4 211.00 0.20 42.20 $42.20 -5 89.00 0.00 0.00 $17.80 0 0.00 0.00 0.00 $0.00 0 0.00 0.00 0.00 $0.00 0 0.00 0.00 0.00 $0.00 0 0.00 0.00 0.00 $0.00

0 0.00 0.00 0.00 $0.00

Value of Research Asset = $3,035.40 $484.60

Amortization of asset for current year = $484.60

Adjustment to Operating Income = $1,109.40 ! A positive number indicates an increase in operating income (add to reported EBIT)Tax Effect of R&D Expensing $377

Look Up Table for Amortization PeriodsIndustry Name Amortization PeriodAdvertising 2Aerospace/Defense 10 Non-technological Service 2 yearsAir Transport 10 Retail, Tech Service 3 yearsAluminum 5 Light Manufacturing 5 yearsApparel 3 Heavy Manufacturing 10 yearsAuto & Truck 10 Research, with Patenting 10 yearsAuto Parts (OEM) 5 Long Gestation Period 10 yearsAuto Parts (Replacement) 5Bank 2Bank (Canadian) 2Bank (Foreign) 2Bank (Midwest) 2Beverage (Alcoholic) 3Beverage (Soft Drink) 3Building Materials 5Cable TV 10Canadian Energy 10Cement & Aggregates 10Chemical (Basic) 10Chemical (Diversified) 10Chemical (Specialty) 10Coal/Alternate Energy 5Computer & Peripherals 5Computer Software & Svcs 3Copper 5Diversified Co. 5Drug 10Drugstore 3Educational Services 3Electric Util. (Central) 10Electric Utility (East) 10Electric Utility (West) 10

Electrical Equipment 10Electronics 5Entertainment 3Environmental 5Financial Services 2Food Processing 3Food Wholesalers 3Foreign Electron/Entertn 5Foreign Telecom. 10Furn./Home Furnishings 3Gold/Silver Mining 5Grocery 2Healthcare Info Systems 3Home Appliance 5Homebuilding 5Hotel/Gaming 3Household Products 3Industrial Services 3Insurance (Diversified) 3Insurance (Life) 3Insurance (Prop/Casualty) 3Internet 3Investment Co. (Domestic) 3Investment Co. (Foreign) 3Investment Co. (Income) 3Machinery 10Manuf. Housing/Rec Veh 5Maritime 10Medical Services 3Medical Supplies 5Metal Fabricating 10Metals & Mining (Div.) 5Natural Gas (Distrib.) 10Natural Gas (Diversified) 10Newspaper 3Office Equip & Supplies 5Oilfield Services/Equip. 5Packaging & Container 5Paper & Forest Products 10

Petroleum (Integrated) 5Petroleum (Producing) 5Precision Instrument 5Publishing 3R.E.I.T. 3Railroad 5Recreation 5Restaurant 2Retail (Special Lines) 2Retail Building Supply 2Retail Store 2Securities Brokerage 2Semiconductor 5Semiconductor Cap Equip 5Shoe 3Steel (General) 5Steel (Integrated) 5Telecom. Equipment 10Telecom. Services 5Textile 5Thrift 2Tire & Rubber 5Tobacco 5Toiletries/Cosmetics 3Trucking/Transp. Leasing 5Utility (Foreign) 10Water Utility 10

Operating Lease ConverterInputsOperating lease expense in current year = $121.00 Operating Lease Commitments (From footnote to financials)

Year Commitment ! Year 1 is next year, ….1 $156.00 2 $143.00 3 $122.00 4 $109.00 5 $97.00

6 and beyond $448.00

OutputPre-tax Cost of Debt = 12.25% ! If you do not have a cost of debt, use the ratings estimator

From the current financial statements, enter the followingReported Operating Income (EBIT) = $17,527.00 ! This is the EBIT reported in the current income statementReported Debt = $109,197.99 ! 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 yearsto estimate the number of years of expenses in yr 6

Converting Operating Leases into debtYear Commitment Present Value

1 $156.00 $138.98 2 $143.00 $113.49 3 $122.00 $86.26 4 $109.00 $68.66 5 $97.00 $54.43

6 and beyond $149.33 $200.40 ! Commitment beyond year 6 converted into an annuity for ten yearsDebt Value of leases = $662.22

Restated FinancialsDepreciation on Operating Lease Asset = $82.78 ! I use straight line depreciationAdjustment to Operating Earnings = $81.12 ! PV of operating leases * Pre-tax cost of debtAdjustment to Total Debt outstanding = $662.22

EBIT (1 -t) = ###Expected growth rate in perpetuity = 5.00%Cost of capital = 10.39%Return on capital = 12.00%

Reinvestment Rate = 41.67%Terminal Value = ###

Growth RateReinvestment Rate FCFF Terminal value0% 0.00% $435,686.471% 8.33% $441,901.462% 16.67% $449,597.583% 25.00% $459,375.904% 33.33% $472,213.655% 41.67% $489,812.96

￦45,278￦41,505￦37,731￦33,958￦30,185￦26,412

Two-Stage FCFF Discount Model

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Input SummaryRupees Dollar

Normalized EBIT (before adjustments)INR 25,464.20 INR 25,464.20

Adjusted EBIT = INR 25,464.20 INR 25,464.20

Adjusted Interest Expense = INR 6,737.00 INR 6,737.00

Adjusted Capital Spending INR 40,291.00 INR 40,291.00

Adjusted Depreciation & Amort'n = INR 8,701.00 INR 8,701.00

Tax Rate on Income = 21.00% 21.00%

Marginal tax rate = 33.99% 33.99%

Current Revenues = INR 265,868.00 INR 265,868.00

Current Non-cash Working Capital = -INR 4,085.00 -INR 4,085.00

Chg. Working Capital = INR 2,732.00 INR 2,732.00

Adjusted Book Value of Debt = INR 62,805.00 INR 62,805.00

Adjusted Book Value of Equity = INR 78,395.00 INR 78,395.00

Invested Capital INR 117,227.00 INR 117,227.00

Length of High Growth Period = 10 Forever

Growth Rate = 12.01% 5.00%

Debt Ratio used in Cost of Capital Calculation=25.30% 25.30%

Beta used for stock = 1.20 1.00

Lambda used for stock = 0.80 0.80

Riskfree rate = 5.00% 5.00%

Mature Market Equity Premium = 4.50% 4.50%

Country Risk Premium = 4.50% 3.00%

Cost of Debt = 12.25% 9.00%

Tax Rate for computing income= 21.00% 33.99%

Marginal tax rate = 33.99% 33.99%

Return on Capital = 17.16% 12.00%

Reinvestment Rate = 70.00% 41.67%

Two-Stage FCFF Discount Model

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Output from the program

Cost of Equity = 14.00%

Equity/(Debt+Equity ) = 74.70%

After-tax Cost of debt = 8.09%

Debt/(Debt +Equity) = 25.30%

Cost of Capital = 12.50%

Intermediate Output

Expected Growth Rate 12.01%

Working Capital as percent of revenues = -1.54% (in percent)

The FCFF for the high growth phase are shown below (upto 10 years)

Current 1 2 3 4 5 6 7 8 9 10

Expected Growth Rate 12.01% 12.01% 12.01% 12.01% 12.01% 10.61% 9.21% 7.80% 6.40% 5.00%

Cumulated Growth 112.01% 125.47% 140.54% 157.42% 176.33% 195.04% 213.00% 229.62% 244.32% 256.54%

Reinvestment Rate 70.00% 70.00% 70.00% 70.00% 70.00% 64.33% 58.67% 53.00% 47.33% 41.67%

EBIT * (1 - tax rate) INR 20,116.71 INR 22,533.20 INR 25,239.97 INR 28,271.88 INR 31,667.99 INR 35,472.05 ### ### ### ### ###

- (CapEx-Depreciation)INR 31,590.00 INR 16,263.95 INR 18,217.62 INR 20,405.99 INR 22,857.22 INR 25,602.91 ### ### ### ### ###

-Chg. Working CapitalINR 2,732.00 -INR 490.70 -INR 549.65 -INR 615.67 -INR 689.63 -INR 772.47 -INR 764.24 -INR 733.59 -INR 679.10 -INR 600.56 -INR 499.03

Free Cashflow to Firm-INR 14,205.29 INR 6,759.96 INR 7,571.99 INR 8,481.56 INR 9,500.40 INR 10,641.62 ### ### ### ### ###

Cost of Capital 12.50% 12.50% 12.50% 12.50% 12.50% 12.08% 11.66% 11.24% 10.81% 10.39%

Cumulated Cost of Capital 1.1250 1.2657 1.4240 1.6020 1.8023 2.0201 2.2556 2.5091 2.7804 3.0693

Present Value $6,009 $5,982 $5,956 $5,930 $5,904 $6,927 $7,852 $8,653 $9,310 $9,808

Growth Rate in Stable Phase = 5.00%

Reinvestment Rate in Stable Phase = 41.67%

FCFF in Stable Phase = INR 26,411.96

Cost of Equity in Stable Phase = 11.90%

Equity/ (Equity + Debt) = 74.70%

AT Cost of Debt in Stable Phase = 5.94%

Debt/ (Equity + Debt) = 25.30%

Two-Stage FCFF Discount Model

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Cost of Capital in Stable Phase = 10.39%

Value at the end of growth phase = ###

Valuation

Present Value of FCFF in high growth phase = INR 72,332.15

Present Value of Terminal Value of Firm = INR 159,581.99

Value of operating assets of the firm = INR 231,914.14

Value of Cash, Marketable Securities & Non-operating assets = INR 151,993.98

Value of Firm = INR 383,908.12

Market Value of outstanding debt = INR 109,197.99

Minority Interest in consolidated holdings = INR 0.00

Market Value of Equity = INR 274,710.13

Value of Equity in Options = INR 0.00

Value of Equity in Common Stock = INR 274,710.13

Market Value of Equity/share = INR 665.07

Market Value of Equity/share in BR = INR 665.07

Year 1 2 3 4 5 6 7 8 9 10EBIT (1-t) 22533 25240 28272 31668 35472 39236 42848 46192 49150 51607 - Reinvestment 15773 17668 19790 22168 24830 25242 25138 24482 23264 21503FCFF 6760 7572 8482 9500 10642 13994 17711 21710 25886 30104

Two-Stage FCFF Discount Model

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Two-Stage FCFF Discount Model

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Terminal Year

###

###

-INR 635.07

###

Two-Stage FCFF Discount Model

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Valuing Options or WarrantsEnter the current stock price = $780.50 Enter the strike price on the option = $13.85 Enter the expiration of the option = 1.5Enter the standard deviation in stock prices = 30.00% (volatility)Enter the annualized dividend yield on stock = 0.00%Enter the treasury bond rate = 5.00%Enter the number of warrants (options) outstanding = 2.23Enter the number of shares outstanding = 413.05

Do not input any numbers below this lineVALUING WARRANTS WHEN THERE IS DILUTIONStock Price= 780.5 # Warrants issued= 2.23Strike Price= 13.85 # Shares outstanding= 413Adjusted S = #VALUE! T.Bond rate= 5.00%Adjusted K = 13.85 Variance= 0.0900Expiration (in years) = 1.5 Annualized dividend yield= 0.00%

Div. Adj. interest rate= 5.00%

d1 = #VALUE!N (d1) = #VALUE!

d2 = #VALUE!N (d2) = #VALUE!

Value per option = #VALUE!Value of all options outstanding = #VALUE!

Bottom-up Beta CalculatorUnlevered beta for sector = 1.04 ! Look up industry averages

OutputFirm's Current market value D/E ratio = 33.87% ! Reverted back to conventional debt to equity ratioFirm's Current tax rate = 33.99%

Bottom-up beta for firm = 1.27

1.6363636364

Inputs for synthetic rating estimationEnter the type of firm = 2 (Enter 1 if large manufacturing firm, 2 if smaller or riskier firm, 3 if financial service firm)

Enter current Earnings before interest and taxes (EBIT) = $17,527.00 (Add back only long term interest expense for financial firms)

Enter current interest expenses = $6,737.00 (Use only long term interest expense for financial firms)Enter current long term government bond rate = 5.00%

OutputInterest coverage ratio = 2.60Estimated Bond Rating = B+Estimated Default Spread = 4.25%Estimated Cost of Debt = 9.25%

For large manufacturing firms For financial service firmsIf interest coverage ratio is If long term interest coverage ratio is

> to≤ Rating is Spread is greater than to≤ Rating is-100000 0.199999 D 15.00% -100000 0.049999 D

0.2 0.649999 C 12.00% 0.05 0.099999 C0.65 0.799999 CC 10.00% 0.1 0.199999 CC0.8 1.249999 CCC 8.50% 0.2 0.299999 CCC1.25 1.499999 B- 5.50% 0.3 0.399999 B-1.5 1.749999 B 5.25% 0.4 0.499999 B1.75 1.999999 B+ 4.25% 0.5 0.599999 B+

2 2.2499999 BB 4.00% 0.6 0.749999 BB2.25 2.49999 BB+ 3.50% 0.75 0.899999 BB+2.5 2.999999 BBB 2.00% 0.9 1.199999 BBB3 4.249999 A- 1.50% 1.2 1.49999 A-

4.25 5.499999 A 1.25% 1.5 1.99999 A5.5 6.499999 A+ 1.00% 2 2.49999 A+6.5 8.499999 AA 0.75% 2.5 2.99999 AA8.50 100000 AAA 0.50% 3 100000 AAA

For smaller and riskier firmsIf interest coverage ratio isgreater than to≤ Rating is Spread is

-100000 0.499999 D 15.00%0.5 0.799999 C 12.00%0.8 1.249999 CC 10.00%1.25 1.499999 CCC 8.50%1.5 1.999999 B- 5.50%2 2.499999 B 5.25%

2.5 2.999999 B+ 4.25%3 3.499999 BB 4.00%

3.5 3.9999999 BB+ 3.50%4 4.499999 BBB 2.00%

4.5 5.999999 A- 1.50%6 7.499999 A 1.25%

7.5 9.499999 A+ 1.00%9.5 12.499999 AA 0.75%12.5 100000 AAA 0.50%

(Enter 1 if large manufacturing firm, 2 if smaller or riskier firm, 3 if financial service firm)

(Add back only long term interest expense for financial firms)

(Use only long term interest expense for financial firms)

Spread isOperating Income Decline15.00% 15.00%12.00% 10.00%10.00% 8.00%8.50% 6.00%5.50% 5.00%5.25% 4.50%4.25% 4.00%4.00% 3.00%3.50% 2.50%2.00% 1.50%1.50% 1.30%1.25% 1.20%1.00% 1.15%0.75% 0.90%0.50% 0.70%

Industry Name Number of firmsLevered Beta Unlevered BetaStd Dev: Equity Market D/E Market Debt/CapitalROE

Advertising 30 1.43 0.87 80.69% 126.31% 55.81% 21.54%

Aerospace/Defense 66 1.27 1.20 47.75% 27.21% 21.39% 25.52%

Air Transport 44 1.15 0.86 60.46% 78.21% 43.89% 31.77%

Apparel 53 1.14 0.93 68.33% 44.32% 30.71% 16.38%

Auto & Truck 20 1.49 0.76 34.92% 183.75% 64.76% 85.35%

Auto Parts 54 1.56 1.10 52.04% 94.19% 48.50% 19.79%

Bank 477 0.71 0.47 27.49% 91.52% 47.79% 14.58%

Bank (Canadian) 8 0.86 0.83 17.85% 10.36% 9.39% 23.19%

Bank (Midwest) 39 0.91 0.66 27.13% 68.98% 40.82% 17.19%

Beverage 41 0.95 0.85 54.53% 19.02% 15.98% 24.85%

Biotechnology 108 1.25 1.27 69.85% 9.98% 9.08% 22.16%

Building Materials 52 1.39 0.80 61.96% 103.11% 50.76% 13.03%

Cable TV 25 1.56 0.95 44.91% 88.77% 47.03% 7.00%

Canadian Energy 12 1.22 0.99 33.84% 35.70% 26.31% 20.83%

Chemical (Basic) 19 1.26 1.10 37.09% 29.11% 22.55% 25.33%

Chemical (Diversified) 33 1.21 1.10 39.47% 26.70% 21.07% 26.45%

Chemical (Specialty) 88 1.18 0.98 57.61% 35.74% 26.33% 18.88%

Coal 18 1.98 1.43 49.41% 48.02% 32.44% 13.96%

Computer Software/Svcs 322 1.22 1.33 71.38% 7.77% 7.21% 47.49%

Computers/Peripherals 125 1.29 1.39 82.96% 18.36% 15.51% 49.14%

Diversified Co. 113 1.25 0.60 48.51% 160.98% 61.68% 29.12%

Drug 342 1.16 1.14 96.99% 14.51% 12.67% 26.23%

E-Commerce 54 1.50 1.76 57.18% 11.43% 10.26% 10.10%

Educational Services 34 0.84 0.89 52.81% 2.22% 2.18% 48.89%

Electric Util. (Central) 24 0.82 0.49 21.09% 107.83% 51.88% 11.46%

Electric Utility (East) 26 0.74 0.50 22.24% 73.30% 42.30% 13.38%

Electric Utility (West) 16 0.79 0.50 18.64% 90.70% 47.56% 10.89%

Electrical Equipment 83 1.37 1.26 57.31% 23.53% 19.05% 24.82%

Electronics 173 1.31 1.23 79.26% 45.62% 31.33% 10.63%

Entertainment 84 1.66 1.09 50.24% 79.23% 44.21% 8.08%

Entertainment Tech 33 1.45 2.33 70.79% 11.54% 10.35% -5.09%

Environmental 79 1.11 0.80 87.19% 49.86% 33.27% 14.34%

Financial Svcs. (Div.) 296 1.27 0.45 62.78% 261.38% 72.33% 14.91%

Food Processing 109 0.80 0.65 40.11% 35.15% 26.01% 20.98%

Food Wholesalers 18 0.73 0.54 46.75% 59.50% 37.30% 15.36%

Foreign Electronics 10 1.18 1.40 25.56% 42.29% 29.72% 12.30%

Furn/Home Furnishings 34 1.29 0.94 43.85% 65.75% 39.67% 12.64%

Grocery 14 0.84 0.78 27.93% 13.91% 12.21% 17.58%

Healthcare Information 29 1.05 1.04 50.75% 19.87% 16.58% 43.47%

Heavy Construction 14 1.48 1.74 42.91% 9.49% 8.67% 21.05%

Homebuilding 32 1.36 0.65 44.28% 162.15% 61.85% -63.59%

Hotel/Gaming 68 1.70 0.84 64.47% 142.62% 58.78% 17.10%

Household Products 26 1.08 0.95 37.34% 23.21% 18.84% 21.67%

Human Resources 31 1.44 1.61 43.81% 18.42% 15.55% 16.30%

Industrial Services 167 1.20 0.98 63.50% 43.98% 30.55% 19.74%

Information Services 34 1.22 1.24 37.26% 21.88% 17.95% 32.04%

Insurance (Life) 35 1.17 1.27 50.74% 21.71% 17.84% 20.91%

Insurance (Prop/Cas.) 78 0.91 0.92 26.47% 1.89% 1.85% 20.44%

Internet 208 1.41 1.66 86.31% 4.07% 3.91% 25.60%

Investment Co. 17 0.83 0.90 18.96% 14.84% 12.92% 647.73%

Investment Co.(Foreign) 16 1.31 1.36 28.87% 5.16% 4.90% 10.46%

Machinery 124 1.39 1.08 48.66% 55.77% 35.80% 23.51%

Manuf. Housing/RV 18 1.32 1.38 47.67% 50.13% 33.39% 8.90%

Maritime 56 1.30 0.52 37.08% 185.73% 65.00% 19.95%

Medical Services 160 1.10 0.90 86.84% 54.66% 35.34% 24.56%

Medical Supplies 252 1.17 1.13 72.38% 13.28% 11.72% 23.17%

Metal Fabricating 35 1.56 1.55 60.00% 25.44% 20.28% 22.01%

Metals & Mining (Div.) 78 1.69 1.48 97.21% 21.94% 17.99% 30.86%

Natural Gas (Div.) 34 1.20 0.85 35.65% 58.57% 36.94% 14.31%

Natural Gas Utility 25 0.69 0.43 25.71% 85.33% 46.04% 12.36%

Newspaper 16 1.16 0.72 34.32% 86.43% 46.36% 13.96%

Office Equip/Supplies 26 1.11 0.84 42.36% 60.35% 37.64% 19.85%

Oil/Gas Distribution 19 0.89 0.53 36.90% 81.95% 45.04% 15.81%

Oilfield Svcs/Equip. 112 1.56 1.27 46.34% 42.35% 29.75% 25.10%

Packaging & Container 33 1.27 0.81 39.90% 84.83% 45.90% 15.41%

Paper/Forest Products 38 1.20 0.64 48.42% 118.10% 54.15% 5.75%

Petroleum (Integrated) 25 1.34 1.30 37.35% 14.67% 12.79% 26.14%

Petroleum (Producing) 188 1.24 0.97 78.27% 37.57% 27.31% 16.75%

Pharmacy Services 19 0.94 0.81 30.96% 23.50% 19.03% 11.99%

Power 66 1.63 0.95 71.09% 107.88% 51.90% 19.05%

Precious Metals 75 1.41 1.37 67.33% 11.77% 10.53% 3.32%

Precision Instrument 90 1.47 1.59 53.96% 22.65% 18.47% 15.26%

Property Management 17 1.38 0.46 32.79% 282.91% 73.88% 9.58%

Publishing 27 1.24 0.62 39.28% 137.13% 57.83% -66.38%

R.E.I.T. 144 1.35 0.92 36.52% 53.19% 34.72% 8.95%

Railroad 15 1.25 0.99 30.42% 41.53% 29.34% 15.12%

Recreation 64 1.41 1.01 57.75% 62.58% 38.49% 14.49%

Reinsurance 11 0.91 1.00 22.33% 11.37% 10.21% 17.04%

Restaurant 68 1.26 1.09 48.95% 24.97% 19.98% 29.70%

Retail (Special Lines) 155 1.26 1.22 57.15% 26.07% 20.68% 23.03%

Retail Automotive 16 1.31 0.93 35.23% 66.88% 40.08% 16.17%

Retail Building Supply 8 1.01 0.86 24.82% 26.35% 20.85% 21.07%

Retail Store 38 1.01 0.86 40.30% 30.29% 23.25% 19.89%

Securities Brokerage 32 1.37 0.37 51.25% 462.27% 82.22% -11.10%

Semiconductor 122 1.81 2.11 59.20% 13.32% 11.75% 22.18%

Semiconductor Equip 16 1.78 2.20 43.35% 13.62% 11.98% 32.37%

Shoe 19 1.23 1.39 39.32% 3.66% 3.53% 28.40%

Steel (General) 20 1.71 1.53 44.25% 32.18% 24.34% 27.03%

Steel (Integrated) 14 1.96 1.54 49.03% 64.96% 39.38% 20.96%

Telecom. Equipment 110 1.49 1.87 75.07% 12.71% 11.28% 35.37%

Telecom. Services 140 1.43 1.06 82.14% 51.32% 33.91% 16.18%

Thrift 234 0.66 0.69 31.62% 9.71% 8.85% 6.69%

Tobacco 12 0.71 0.69 29.69% 8.84% 8.12% 70.43%

Toiletries/Cosmetics 23 0.95 0.79 51.70% 38.50% 27.80% 98.41%

Trucking 33 1.17 0.66 38.85% 126.80% 55.91% 12.03%

Utility (Foreign) 5 1.23 0.85 28.01% 62.82% 38.58% 3.89%

Water Utility 16 0.86 0.57 35.87% 82.79% 45.29% 0.63%

Wireless Networking 57 1.54 1.28 58.41% 36.37% 26.67% 7.85%

Public/Private Equity 10 2.08 0.48 45.59% 391.15% 79.64% 17.72%

Funeral Services 6 1.41 1.02 29.93% 67.25% 40.21% 15.04%

Market 6870 1.19 0.93 56.57% 48.81% 32.80% 20.64%

ROC Effective Tax Rate Pre-tax Operating MarginAfter-tax Operating MarginNet Margin

13.01% 18.90% 17.93% 11.95% 2.26%

19.53% 24.10% 12.31% 8.31% 3.57%

22.00% 23.00% 13.57% 11.05% 0.17%

18.05% 17.21% 12.98% 10.18% 2.69%

18.80% 24.36% 13.10% 7.96% 0.57%

21.81% 19.61% 7.65% 5.56% 0.90%

NA 25.91% NA NA NA

NA 15.08% NA NA NA

NA 26.81% NA NA NA

18.98% 16.46% 20.00% 14.75% 5.77%

14.78% 3.59% 26.91% 16.90% 8.33%

11.35% 18.44% 14.04% 10.51% 2.23%

10.91% 22.97% 34.41% 19.49% 3.28%

25.35% 27.82% 40.66% 28.84% 9.48%

21.96% 19.29% 15.05% 11.97% 6.40%

23.67% 25.47% 19.87% 14.14% 5.55%

17.93% 18.99% 14.08% 9.75% 2.69%

20.13% 10.52% 18.05% 15.76% 4.53%

36.64% 12.65% 24.51% 17.24% 8.24%

32.96% 9.90% 11.61% 8.78% 3.55%

10.79% 20.23% 22.39% 17.93% 4.85%

22.57% 5.96% 30.15% 22.65% 8.38%

12.54% 13.09% 12.69% 8.76% 3.38%

46.84% 20.80% 17.36% 11.69% 5.63%

10.28% 33.02% 21.86% 14.67% 3.61%

11.64% 32.09% 25.85% 17.24% 4.49%

11.52% 30.47% 24.38% 16.51% 3.72%

20.50% 14.23% 15.75% 11.48% 4.96%

13.01% 11.87% 7.57% 5.61% 1.40%

9.98% 17.17% 23.75% 15.00% 3.66%

4.51% 13.67% 3.93% 1.77% -1.45%

13.67% 15.45% 21.85% 13.42% 3.48%

12.33% 17.93% 85.68% 76.59% -22.60%

15.64% 21.67% 11.98% 8.59% 2.98%

14.62% 27.39% 5.66% 3.75% 0.94%

16.90% 37.04% 13.50% 7.43% 1.67%

13.85% 23.99% 10.51% 7.04% 1.43%

17.38% 32.96% 5.87% 3.81% 1.06%

24.69% 16.47% 20.66% 14.16% 7.79%

18.45% 34.26% 5.98% 3.85% 2.23%

-23.17% 6.13% -16.16% -16.36% -10.34%

10.83% 17.97% 22.98% 15.26% 3.26%

17.10% 29.87% 21.24% 15.33% 5.90%

17.34% 29.77% 5.69% 3.31% 1.20%

18.18% 19.26% 11.76% 8.27% 2.03%

21.20% 20.44% 21.26% 14.72% 5.92%

NA 25.86% NA NA NA

NA 20.26% NA NA NA

26.46% 7.50% 19.23% 13.94% 6.53%

NA 0.00% NA NA NA

NA 2.11% NA NA NA

17.21% 22.71% 13.72% 9.49% 3.49%

9.47% 14.98% 3.83% 2.37% -1.61%

12.18% 7.08% 30.66% 29.09% 13.32%

18.25% 18.36% 12.69% 8.16% 2.38%

20.34% 12.51% 11.53% 8.54% 3.60%

21.33% 20.43% 14.65% 10.22% 2.71%

27.62% 9.29% 36.00% 25.33% 5.94%

15.08% 24.19% 34.06% 23.75% 9.41%

12.02% 24.52% 14.77% 10.36% 2.30%

11.21% 23.53% 21.90% 16.06% 2.18%

15.81% 22.76% 9.94% 6.92% 1.74%

11.69% 9.48% 15.24% 12.24% 4.25%

20.50% 22.07% 26.36% 19.65% 8.24%

17.06% 24.65% 13.39% 10.04% 1.97%

11.21% 13.66% 12.24% 10.31% 0.80%

25.61% 33.79% 17.96% 10.45% 5.11%

23.41% 13.98% 38.57% 26.43% 6.99%

12.17% 21.13% 6.41% 4.13% 1.43%

11.71% 6.25% 18.09% 12.74% 2.50%

8.54% 5.94% 32.80% 23.79% 9.32%

16.76% 14.38% 16.31% 12.59% 4.11%

9.81% 19.27% 35.51% 27.99% 4.02%

20.12% 20.73% 17.26% 10.27% 1.30%

8.49% 1.21% 18.11% 16.08% 61.19%

13.91% 30.62% 31.92% 20.60% 7.24%

14.02% 19.12% 19.56% 15.62% 4.49%

NA 8.87% NA NA NA

22.15% 20.10% 16.35% 13.16% 4.10%

22.65% 23.08% 9.37% 6.06% 1.82%

11.67% 34.23% 6.72% 4.31% 1.26%

17.82% 28.12% 11.59% 7.31% 2.26%

15.19% 25.68% 6.93% 4.47% 1.56%

15.35% 22.16% 33.95% 25.61% -1.40%

28.67% 10.48% 27.73% 21.97% 4.69%

29.91% 22.03% 23.75% 17.41% 4.57%

28.46% 30.35% 12.52% 8.44% 1.68%

21.54% 29.15% 12.53% 8.29% 4.36%

19.41% 29.90% 18.78% 14.41% 5.67%

26.58% 12.08% 13.97% 10.62% 2.81%

22.22% 15.90% 39.80% 28.38% 3.45%

NA 17.04% NA NA NA

32.64% 20.25% 9.68% 6.66% 3.00%

23.11% 23.28% 12.03% 7.97% 3.04%

12.67% 33.19% 13.28% 8.54% 0.95%

9.93% 15.01% 15.29% 9.47% 0.01%

8.11% 35.46% 40.45% 25.93% 3.63%

10.21% 14.08% 18.28% 11.63% 3.52%

6.46% 6.70% 53.29% 47.57% 22.90%

11.67% 33.26% 20.82% 13.16% 2.96%

17.73% 16.67% 20.77% 14.61% 3.44%

Cap Ex/ DepreciationNon-cash WC/ RevenuesPayout RatioReinvestment RateSales/Capital EV/Sales

66.89% -15.13% 7.17% -1.16% 1.09 0.94

115.91% -0.61% 12.42% -0.05% 2.35 0.73

158.61% -8.01% 9.33% 13.68% 1.99 0.65

141.22% 19.55% 8.42% -0.71% 1.77 0.64

90.69% 13.27% 8.71% 6.48% 2.36 0.51

94.73% 6.44% 17.95% -4.20% 3.92 0.29

NA NA 36.07% 0.00% NA NA

NA NA 46.75% 0.00% NA NA

NA NA 54.64% 0.00% NA NA

115.01% 5.16% 23.38% 5.26% 1.29 1.99

128.27% 4.60% 0.49% 6.79% 0.87 5.71

130.86% 6.64% 14.30% 9.21% 1.08 0.85

102.79% -10.57% 11.78% 3.61% 0.56 2.20

211.40% -5.37% 11.45% 28.10% 0.88 1.61

109.34% 11.16% 16.37% -6.47% 1.84 0.88

118.69% 13.88% 19.75% -9.92% 1.67 1.15

109.81% 11.64% 17.73% -2.32% 1.84 0.90

139.17% 4.69% 20.71% 5.35% 1.28 1.26

89.63% -6.37% 10.17% -0.96% 2.12 1.93

95.27% -0.69% 6.33% -1.84% 3.75 0.70

146.86% 91.24% 20.12% -12.75% 0.60 1.96

61.72% 10.48% 25.99% -5.83% 1.00 2.63

146.25% -14.07% 1.20% 8.42% 1.43 1.86

106.44% -11.48% 2.31% 5.63% 4.01 2.75

218.97% 5.39% 31.65% 31.79% 0.70 1.65

206.28% 5.64% 29.52% 25.82% 0.68 1.93

218.34% 1.50% 24.77% 34.95% 0.70 1.57

126.55% 12.14% 13.79% -2.87% 1.79 1.00

122.53% 12.65% 7.35% 0.49% 2.32 0.32

91.06% -0.16% 11.91% -1.55% 0.67 1.27

66.84% -6.03% NA 51.10% 2.55 0.85

99.42% 3.48% 22.11% -4.43% 1.02 1.73

258.58% 28.75% 22.83% -612.73% 0.16 6.96

123.88% 6.15% 14.65% -7.14% 1.82 1.01

122.12% 0.94% 11.15% 4.36% 3.90 0.36

87.71% 8.53% 9.77% -6.57% 2.27 0.32

84.73% 13.15% 13.14% -0.04% 1.97 0.45

165.00% -0.29% 6.47% 18.50% 4.56 0.79

84.61% 4.58% 3.84% -6.78% 1.74 2.08

142.75% 1.17% 3.83% -4.58% 4.80 0.49

72.88% 57.77% NA NA 1.42 0.58

330.71% -3.58% 10.47% 52.78% 0.71 1.50

94.67% 5.69% 21.58% -2.39% 1.12 2.05

81.85% 5.48% 7.33% -7.15% 5.24 0.23

134.26% 6.88% 5.16% 7.60% 2.20 0.71

98.29% -1.64% 5.47% 0.90% 1.44 1.68

192725.00% NA 23.35% 0.00% NA NA

38706.98% NA 14.29% -0.07% NA NA

133.62% -6.83% 0.20% 6.25% 1.90 2.22

20.00% NA NA NA NA NA

84.21% NA 36.72% -1.55% NA NA

134.95% 16.14% 10.21% -1.51% 1.81 0.70

81.33% 5.71% 9.05% 9.17% 3.99 0.17

523.30% 7.18% 17.67% 69.70% 0.42 2.23

146.47% -6.66% 0.86% 5.72% 2.24 0.59

98.75% 6.59% 15.25% -3.33% 2.38 1.08

195.35% 10.84% 10.49% 8.66% 2.09 0.59

251.65% 5.81% 10.00% 10.91% 1.09 1.49

281.53% -3.94% 13.80% 50.53% 0.63 2.00

146.56% 5.17% 30.14% 8.35% 1.16 1.09

71.55% 3.05% 9.12% -4.55% 0.70 1.12

83.36% 9.33% 10.66% -5.75% 2.28 0.52

373.42% -0.45% 39.70% 47.94% 0.95 1.36

268.73% 12.70% 6.06% 18.86% 1.04 1.24

95.74% 5.96% 12.39% -3.29% 1.70 0.72

90.62% 11.37% 28.92% 0.62% 1.09 0.74

186.98% 2.22% 14.04% 12.52% 2.45 0.65

291.48% 2.89% 5.13% 42.65% 0.89 1.29

163.33% 5.33% 6.20% 2.63% 2.95 0.56

197.18% 6.96% 0.19% 12.47% 0.92 1.54

230.19% 0.02% 19.95% 51.75% 0.36 4.72

51.15% 10.13% 4.96% -14.88% 1.33 0.92

608.41% -17.86% 23.90% 94.40% 0.35 2.90

89.69% 4.17% 80.61% -1.09% 1.96 0.89

607.00% -4.12% 115.46% 242.89% 0.53 4.05

190.87% -4.11% 14.10% 18.83% 0.68 2.03

201.19% -0.80% 21.67% 20.73% 0.90 1.16

NA NA 12.85% 0.00% NA NA

178.56% -5.11% 21.18% 14.97% 1.68 1.57

139.68% 6.30% 9.70% 9.60% 3.74 0.40

233.04% 12.86% 1.96% 24.14% 2.70 0.47

242.53% 5.07% 14.55% 23.42% 2.44 0.72

202.23% 1.53% 11.18% 22.28% 3.40 0.54

166.76% 120.39% 28.02% 140.87% 0.60 1.82

110.68% 8.97% 21.82% 1.50% 1.30 1.31

95.15% 15.62% 5.01% 5.06% 1.72 0.81

135.60% 16.15% 11.89% 1.42% 3.37 0.84

187.15% 14.33% 9.43% -13.36% 2.60 0.55

124.02% 15.49% 6.35% -8.04% 1.35 0.59

71.60% 0.25% 13.06% -7.29% 2.50 0.90

190.13% -10.85% 21.11% -1.41% 0.78 1.69

NA NA 64.16% 422.33% NA NA

331.23% 0.78% 32.09% 24.30% 4.90 1.47

117.56% 8.54% 16.72% 0.78% 2.90 0.98

682.72% 5.27% 8.06% 170.96% 1.48 0.75

143.73% 4.62% 0.00% 0.00% 1.05 0.90

262.28% 1.68% 274.15% 18.42% 0.31 3.80

82.96% 6.91% 1.53% -32.77% 0.88 2.36

15.66% 33.11% 23.46% 0.73% 0.14 4.01

116.53% 0.96% 17.83% 1.70% 0.89 1.40

158.90% 9.07% 16.22% -30.90% 1.21 1.28