BBY: NYSE

A Private Equity Valuation

MMS:DKU Team 2 – Jingduo Bi, Yunning Emma Zhang, Nian Liu, Austin Taylor

Table of Contents

Executive Summary

Business Strategy

Forecast Report Assumptions

Free Cash Flow Valuations

Free Cash Flow Unlevered (FCFU)

Free Cash Flow Common Equity (FCFCE)

Economic Value Added (EVA)

Multiples Valuations

Enterprise Value to Sales Multiples

Enterprise Value to EBITDA Multiples

Ratio Analyses

Return on Assets (ROA), Asset Turnover, Net Income Efficiency, Profit Margin

Return on Equity (ROE), Financial Leverage, Price to Earnings Ratio (P/E)

Sensitivity Analysis

FCFU, FCFCE, EVA

Enterprise Value Multiples

Recommendations

Supporting Tables and Documents

Executive Summary

Upon the request to evaluate Best Buy for a private equity acquisition, we carefully calculated growth

rates, cost of equity and debt, market beta, and other pertinent figures, we generated pro-forma

financial statements, including terminal value, for the next five years. After a careful and thorough

valuation of multiple perspectives on Best Buy, Inc, we recommend against buying at this time for

several reasons.

First of all, the business strategy that Best Buy is proposing seems unreasonable and desperate. Best

Buy is communicating to shareholders and to the general public that they will offer high-quality service

as a differentiator while still maintaining unbeatable prices. Experience leads us to believe that this

mixed bag strategy is likely to produce a mixed bag of performance results; it is not likely to be

sustainable going forward due to increasing costs of training and other developmental costs coupled

with a decline in profit margins and possibly sales revenue.

Secondly, when considering the free cash flow valuations, both unlevered and common equity, neither

shows an intrinsic value that would lead us to the buy recommendation. The best cast for the FCFU

valuation is $28.95 and the best case for the FCFCE valuation is $29.24, both of which are well below the

May 1 BBY trading price of $35.18. Our best case intrinsic value when using the economic value added

model shows $34.95, which still falls below the current market price.

Last of all, using a multiples comparison of various firms shows very little consistency, proving that the

only two truly comparable firms, Circuit City and Radio Shack, have collapsed and declared bankruptcy.

Similar semi-specialized firms in other industries such as Staples struggle to turn sales into earnings and

successful large scale retailers such as Wal-Mart carry a significantly wider product portfolio in order to

increase shopper traffic.

These and other details of our analyses lead us to recommend against purchasing Best Buy at this time.

This recommendation would need to be reevaluated if there were significant changes in stock price,

market conditions, firm growth rate, or strategic direction. Until one or more of those events take

place, we see Best Buy stock as being overvalued in the market when compared to its intrinsic value.

Business Strategy

Best Buy’s current business strategy is based around a cost leadership strategy, and their sales

associates are often known to price match and give discounts to close a sale. Their profit margin and

asset turnover both support this strategy and their ROA and ROE ratios are both very similar to those of

Wal-Mart, the firm that made famous the concept of “everyday low prices.” Recently, Best Buy has

been closing down unprofitable stores and business units and has been employing many cost cutting

strategies in order to protect their margins. However, the letter to shareholders and other news sources

describe Best Buy’s “Renew Blue” strategy, which aims to improve the customer experience, increase

customer-facing labor, further train store associates, and upgrade their stores. This strategy seems to

point them in the direction of a differentiator strategy, yet their corporate vision retains the phrase

“unbeatable price.” Our concern with this new blended strategy is that they are at the very lease

internally inconsistent, if not mutually exclusive. Even considering the possibility of firms that are an

exception to the rule, the market conditions have not been reassuring to those who would hold onto

this view. Best Buy’s two primary competitors, Circuit City and Radio Shack, have both declared

bankruptcy, and of semi-specialized retailers in other industries, at least Staples is bogged down by the

costs of aiming for high quality service while not commanding a price premium to compensate. Market

conditions point to the deterioration of these fence-sitting, cost-leading-differentiators. Best Buy would

likely be more successful in the long-run if they assimilated more to Target and Wal-Mart type retailers,

which would require extensive product line expansion and rebranding. If Best Buy truly desires a

differentiator role, they will have to approach profit margins comparable to those of Apple and other

similar firms, which would require a great deal of product portfolio evaluation, revamping, and

rebranding. Ultimately, they would have to change their brand image enough to command a significant

price premium and they would have to provide a level of service and expertise on par with the customer

segment who is willing to pay those prices; at best it is a long-shot in our opinion. Judging from the

direction from the executive suite, it is more likely that Best Buy will continue to walk the fine line in the

gray area between the two strategies along with Staples and other semi specialized retailers, all the

while hoping to avoid the imminent trends in the market.

Forecast Report Assumptions

To begin our valuation process, we first generated 5-year pro-forma financial statements for Best Buy

based on several predictions and assumptions. We began by first determining an appropriate set of

growth rates in order to generate revenue projections on the income statement. Since Best Buy began

divesting unprofitable businesses, especially in Canada, during 2013, we did not use the historical

average growth rate since we do not believe this trend will continue in the future. To generate the 2016

growth rate and mitigate the downward trend that is expected to reverse, we averaged the projections

of several analysts. We performed a similar process for the growth rate over the next 5 years, averaging

the projections from several financial sources. In order to determine the growth rate in perpetuity for

our terminal value, we used an approximated GDP growth rate.

For our projections of cost of goods sold we used the historical average of COGS as a percentage of

revenues. For COGS in 2016, 2017 and 2018, we reduced the cost by $150, $133, and $133 respectively

because, as the company stated in its letter to shareholders, they will save about $400 million in

material goods over the next three years to further strengthen their cost leadership strategy. In

addition, we projected further restructuring charges since Best Buy is likely to continue to restructure in

2016 by laying off employees and making other investments in order to reduce declining revenues from

Canada. Since Best buy is divesting its unprofitable business, we assume that it will continue to do so in

the coming year by selling the business units and we assume a gain on sale of investment and business

of $149 in 2016. The loss from discontinuous operation is assumed as 50 since Best Buy will continue to

sell its unprofitable business by closing some store in Canada.

In terms of goodwill impairment, we assumed fair value excess carrying value during forecast years, so

goodwill impairment during 2016-2020 will be 0. We hold that common equity, accumulated other

comprehensive income, and additional paid in capital are consistent from 2015. Similarly, weighted-

average common shares outstanding (basic and diluted) is assumed consistent since 2005. We assume a

foreign currency exchange of 0. Unrealized gain (loss) on available-for-sale investments and

reclassification of (gains) losses on available-for-sale investments into earnings are also assumed as 0

since they represent extenuating circumstances.

To calculate the cost of equity, we used the 10 year average of the S&P 500 for the market rate, the 10-

year treasury bond rate for the risk free rate, and the average of several analyst reports (barring those

that were outliers) for the market beta.

For our balance sheet calculations, we first assumed that short-term investment will increase $50 and

$100 respectively in 2016 and 2017 to support its operations, consistent with its document filings. We

further assume that current assets held for sale are 0 and that there are no current assets held for sale

during 2016-2020. We assume that non-controlling interest and long-term Liabilities held for sale are 0

since these represent extenuating circumstances. Common stock and additional paid capital are

assumed consistent from 2016 as the firm stabilizes. To calculate the cost of debt, we referred to the

financial statement footnotes that gave details for 2016, 2018, 2021 notes. We used fair value of these

notes, weighted average coupon rates, and an increase in short term investments to support operations,

consistent with several news sources.

On the statement of cash flows, we assumed that there will be no definite-lived trademarks to amortize

in 2016 and thereafter, so amortization expense will be 0. Amortization of definite-lived intangible

assets, goodwill impairments, (gain) loss on sale of business, stock-based compensation, realized gain on

sale of investment, deferred income taxes, and excess tax benefit from stock-based compensation are

assumed as 0 since 2016. Likewise, payment to non-controlling interests, acquisition of non-controlling

interests, acquisition of business, proceeds from sale of business, and settlement of net investment

hedge are assumed as 0 since 2016 since they were only occasionally generated in the historic data. The

statement of cash flows was generated primarily from the other two financial reports, especially the

balance sheet.

Free Cash Flow Valuations

We employed several valuation methods in order to have a well-rounded and accurate valuation figure

to consider. Each valuation model was chosen to provide a unique perspective and to incorporate

different data points to ensure that our recommendation was as well-supported by the data as possible.

Free Cash Flow Unlevered (FCFU)

For our free cash flow valuation methods, we used the operating asset view and capitalized all operating

leases since we believe that this would be a more profit maximizing structure for Best Buy. We iterated

the WACC and got consistent results before moving into the present value discounted cash flows and

subsequent valuations. After completing the valuation, we arrived at an intrinsic price of $26.58, which

shows Best Buy as significantly overvalued at $35.18 as of May 1.

Free Cash Flow Common Equity (FCFCE)

After we had completed the free cash flow valuation for the unlevered firm, we wanted to validate our

results for common equity shareholders as well to ensure that we had achieved consistent and reliable

results. Our resulting valuation was very consistent with our free cash flow valuation for the unlevered

firm, giving us an intrinsic value of $27.79 and revealing that Best Buy stock is overvalued.

Economic Value Added (EVA)

When generating the economic value added valuation, we depended only on the income statement and

the balance sheet without making any modifications or adjustments. Our goal was to provide a slightly

different perspective in order to most nearly approximate a likely valuation that covered all variables.

Our EVA projection returned a value of $33.38 which, although it comes much nearer to the May 1 stock

price, still demonstrates that BBY stock is overvalued. The relative consistency of the EVA valuation with

those of the FCFU and FCFCE valuations validates our financial model and gives confidence in moving

forward with a strong and grounded recommendation.

Multiples Valuations

Our selection of comparable companies was challenged by the market conditions that have limited the

ability to compare Best Buy directly with other firms. For instance, Circuit City and Radio Shack, the two

firms most similar to Best Buy over the years, have both filed bankruptcy and cannot be used for

comparison with Best Buy. The next most comparable firm, Sears, is a privately-held company and

cannot be used in multiples for this reason. Among the companies we selected, Amazon and Target are

running losses and therefore tend to skew the comparable data. As technology companies with a high

degree of research and development, Amazon and Apple also tend to skew our valuation results and are

not great candidates for comparison since they both have very different business models than Best Buy.

Although Target and Wal-Mart both share the retail space with Best Buy, they are more diversified than

Best Buy is in terms of the product lines they sell and are therefore less specialized than Best Buy is,

rendering them approximately comparable companies at best. We feel that Staples provides the most

accurate comparison to the Best Buy business model since Staples and Best Buy are both retailers that

claim a certain degree of expertise in a particular family of products and carry a much more expansive

variety of these types of products than do full scale retailers such as Target and Wal-Mart. One caveat

to this selection is that Staples specializes in paper products and office supplies, while Best Buy

specializes in consumer electronics and similar products. Because the markets are very different, there

are likely to be some differences in performance that would skew this multiples valuation. Another

source of distortion could be differing customer buying behaviors in each store. For example, Staples

tends to attract a more sophisticated buyer, often for business purchases, while Best Buy tends to

attract more everyday consumers, usually making personal purchases. These variations

notwithstanding, Staples seems to offer the most accurate comparison to Best Buy’s business model.

Enterprise Value to Sales Multiples

The enterprise value to sales multiples that we used showed a great variety of results in our valuation

due to the high degree of variation between each comparable company and Best Buy. A valuation using

the average enterprise value to sales multiple of Amazon, Apple, Target, Staples, and Wal-Mart yielded a

stock price of $190.52, which seems very high and unreliable. A major contributor to this result was the

fact that we were averaging multiples of two tech firms with three retail firms. For example, a multiple

using the average of only tech firms (Amazon and Apple) yielded a valuation of $367.17, while a multiple

using the average of only retail firms (Target, Staples, and Wal-Mart) yielded a valuation of $72.76,

which is much more reasonable. We also considered firm-specific multiples for Apple, Wal-Mart, and

Staples, which yielded valuations of $469.14, $66.18 and %54.72, respectively. We chose the Apple

multiple to attempt to determine the maximum possible value of Best Buy if they were to abandon their

cost leader strategy and adopt a full differentiator strategy more similar to Apple. We consider this

valuation to be highly risky and inaccurate, since Apple is a very different company from Best Buy in

several different areas. Being a tech firm that can develop and manufacture and sell its own products,

the supply chain and almost all other business operations will be different for Apple than they are for

Best Buy. We would recommend against using this multiple outside of extreme circumstances. We feel

that the multiples valuation with Wal-Mart is much more accurate and representative of the Best Buy

business model. Since Best Buy and Wal-Mart are both seen primarily as cost leaders at this time, the

strategic elements of their business are roughly similar and, although Wal-Mart is much more highly

diversified in the product lines they sell, Best Buy does maintain a certain degree of variety in their

product offerings. We hold that the Staples multiples valuation is the most reliable and accurate of the

three since Staples and Best Buy are both specialized retailers offering a greater variety and level of

expertise than full scale retailers such as Target and Wal-Mart. It is important to note that even this

valuation is subject to a fair amount of variability and error since Staples and Best Buy belong to

different industries and target slightly different customers.

Enterprise Value to EBITDA Multiples

The rationale behind our selection of the enterprise value to EBITDA multiples was that we wanted a

way to represent all five firms directly with minimal variation and our hope was that using the EBITDA

would counteract some of the differences due to varying strategies and capital structures among firms.

After eliminating Amazon as an extreme outlier for our valuation, we averaged the multiples for Apple,

Target, Wal-Mart, and Staples to generate our projection. The resulting valuation was $47.27 and,

although it performed much better than the average enterprise value to sales multiple for all five firms,

we fear that EBITDA multiples may disguise important information in this valuation that would skew its

accuracy in the future. For example, EBITDA would be drastically effected by capitalization and, since

we feel that lease capitalization will be the most efficient capital structure going forward, using such a

valuation would be inconsistent with our overall assessment of the situation. Our EV to sales multiples

with Wal-Mart and Staples as individual firms came close enough to what we would consider to be a

reasonably plausible valuation of Best Buy, so we preferred to use these over the EBITDA multiple.

Ratio Analyses

We gathered a variety of ratios in order to provide a well-rounded and diverse analysis in condensed our

findings to compare Best Buy with the most relevant comparable firms, namely Apple, Wal-Mart, and

Staples. Although we calculated these returns for all six firms, we were unable to use sales to net

income efficiency, price to earnings, return on assets, and return on equity ratios for Amazon and Target

since their running a loss rendered the ratios unusable. The following sections will only discuss results

from the distilled analysis including Best Buy, Apple, Wal-Mart, and Staples.

Return on Assets (ROA), Asset Turnover, Net Income Efficiency, and Profit Margin

The ROA ratios show that Best Buy has a much higher return on assets than does Staples and a much

lower return on assets than does Apple. Its ROA is relatively comparable to that of Wal-Mart, which

seems to validate using Wal-Mart as a comparable firm at least in some areas. The variation of the ROA

from Apple and Staples could be explained at least in part by the profit margin. When compared with

Apple, the profit margin is significantly lower, which will lead to Apple having a much greater return on

assets even though they have a lower degree of asset turnover. When compared with Staples, Best

Buy’s ROA is much higher, which can be explained by Best Buy’s superior net income efficiency. Charges

to the income statement have reduced the efficiency with which Staples converts sales to earnings, and

this in turn leads to a lower return on assets ratio. The profit margin comparison also shows that Best

Buy has by no insignificant amount the narrowest margin on its sales, although it is within reach of the

profit margins of both Wal-Mart and Staples. This shows that Best Buy could possibly shift to a slightly

higher pricing scheme more similar to that of Staples than to that of Wal-Mart in order to justify the

higher level of service and expertise. The profit margin that Apple shows is high enough that it seems a

bit out of reach for Best Buy without drastic changes.

Return on Equity (ROE), Financial Leverage, and Price to Earnings (P/E)

The ROE ratios show that Best Buy has a much higher return on equity than does Staples, which can be

explained by Best Buy’s superior ability to convert sales to earnings. In like manner, its ROE falls below

that of Apple, which could be explained at least in part by Apple’s superior ability to generate earnings

from sales. The lower returns on equity for both Best Buy and Staples lead in turn to a lower price to

earnings ratio. Our findings also showed that Best Buy has the highest financial leverage ratio in our

distilled analysis, indicating that it has quite a bit more debt than equity. This could indicate that Best

Buy is more of a risk-seeking firm and it also may indicate that Best Buy is cash-strapped and is

struggling to find investors, so they are turning to the banks. Either way, these facts make Best Buy a

more risky investment, regardless of what the current stock price would suggest.

Sensitivity Analysis

Before making a decision on whether to bid on Best Buy, the valuation results should be subject to

scrutiny by evaluating the sensitivity analyses provided below.

FCFU, FCFCE, EVA

The sensitivity analysis of the free cash flow and economic value added valuations highlights the effect

of growth rate on our valuation. This analysis clearly shows that, for the free cash flow methods, only a

5-year growth rate of almost 8% will produce a valuation over $30, and this only occurs in the FCFCE

valuation. Even at a 5-year growth rate of 8%, the Best Buy stock would still be over-valued by the free

cash flow methods. The results hold true when applied to the growth rate in perpetuity for these

methods as well. The EVA model, by contrast, starts with a valuation of over $33, but is not very

sensitive to changes in the 5-year growth rate, as a 3% increase in 5-year growth only represents a $0.50

increase in the stock’s intrinsic value. The EVA model is more affected by the long term growth rates,

however, even under the best scenario for long term growth rate, the intrinsic value does not quite

reach $35. These results tell us that even in the best-case scenario with respect to growth rates, our

valuation will still show Best Buy as over-valued. The consistency of these three valuation models leads

us to accept this range as the most accurate and likely representation of the value of Best Buy stock.

When considering an absolute best-case scenario, the multiples valuation is the only valuation that

shows Best Buy as being currently undervalued.

Enterprise Value Multiples

As seen in the sensitivity analysis of the enterprise multiples with Staples, Wal-Mart and Apple, the key

figure in our evaluation by this model is the degree to which Best Buy is able to retain their current flow

of sales revenues. For example, based on the 2014 sales figures, the Wal-Mart multiples valuation

shows a stock price of $65.51, while the current market price is $36.80. At somewhere between 55%

and 60% of their current sales revenue, the stock price would break even, meaning that the value of

Best Buy by the Wal-Mart multiples valuation would continue to show Best Buy as undervalued even if

they lost up to 40% or more of their sales. Best Buy could lose sales by moving to a strictly cost-

leadership position such as Wal-Mart if buyers were traveling to Best Buy rather than purchasing at a

similar price from Wal-Mart due to the higher degree of expertise found at Best Buy. Moving toward a

strictly cost-leadership position would prevent them from continuing to invest more money into

employee training and they would lose this competitive advantage; however, the sensitivity analysis

shows that Best Buy could afford to lose a fair number of sales and still outperform current stock prices.

Similarly, Best Buy could see an astronomical stock value if they were to abandon cost-leadership and

move to a differentiation strategy more similar to Apple. Even losing 50% or more of their sales, Best

Buy would still be significantly undervalued and would make a fortune for any early investors. One

major caveat to the Apple multiples valuation is that Best Buy is very different from Apple since it is a

solely retail-based business, while Apple enjoys the privilege of developing and manufacturing new

products. This does not mean that Best Buy could not adopt a high-end, differentiated strategy, but it

does mean that we should be very careful in using the enterprise value to sales multiple in our valuation

decisions. Because the firms are so very different, we believe that multiples valuations between Best

Buy and Apple can be very deceiving.

The multiples valuation using the enterprise value to sales multiple from Staples produced the closest

valuation to our other three models. The sensitivity analysis of this valuation shows that Best Buy will

be undervalued as long as they do not lose more than 30% of their revenue. Since this multiple shows

an approximation of Best Buy value if they change only their pricing to a slight degree, the loss of

customers would likely be due to customers seeing a disproportionate price increase for the level of

expertise and variety to which they have access. The sensitivity analysis shows that Best Buy could

afford to lose up to approximately 30% of their customers in this or other ways.

Recommendations

Since Best Buy is a rather unique company with no true comparable firms, we feel that the multiples

analysis is a risky valuation on which to base any purchase decision. Of the two most comparable

companies, Wal-Mart is a full scale retailer and Staples belongs to a different industry, so even multiple

valuations with these companies are most likely ball-park estimates. For these reasons, we recommend

disregarding the multiples valuations and making a buying decision based on the FCFU, FCFCE, and EVA

valuation results. When considering the best case scenarios for each of these valuations, the highest

valuation is the EVA value, which produces an intrinsic price of $34.95. Even this best case value still

comes up shy of the $35.18 stock price on May 1 and shows that BBY stock is currently overvalued. Our

sensitivity analysis on these valuations shows that the price is unlikely to increase beyond our projected

maximum without unprecedented changes in industry or company growth rates. Furthermore, the risk

profile for Best Buy seems high since their current development strategy is a paradox unlikely to be

sustainable under the current market conditions. We would therefore recommend against buying Best

Buy, at least until stock prices adjust, the company’s strategic direction is designed to be internally

consistent, or market conditions change.

Income Statement

Revenue Growth

Thomson one CNN Money Walmart Yahoo Fin Bloomberg 2016 Avg 2017-2020 Avg Thereafter

-1.24% -1.34% -0.0055 -0.06% 2% -0.24%

0.07% 12% 6.04%

2% similar to GDP growth rate

we didn't use historical avg growth rate because in 2013 BBY started divesting unprofitable business (eg. Canada) and impact revenue substantially

and we don't believe this trend will continue in the future.

COGS uses hitorical average percentage of revenues, for COGS in 2016, 2017 and 2018, we reduce cost of 150,133,133 respectively because as the company stated in its letter to shareholders, they will save cost about

400 millions in the next three years which will be consistent with its cost leadership strategy.

Restructuring Charge: Since BBY has experienced declining revenues from Canada, according to market realist report, it will continue to restruct in 2016 by laying off employees and making other investments.

So since the restructing charge in 2015 is 5, so we make an assumption that the restructuring charge in 2016 will be100 because there will be changeover in Best Buy Canada and thereafter will be 0.

Source: BBC News - http://www.bbc.com/news/business-32105891

Gain on sale of investment and business: since Best buy is divesting in unprofitable business, we assume that it will continue in 2016 by selling the business and we assume its 149 in 2016.

Goodwill impairment: assume fair value excess carrying value during forecast years. So goodwill impairment during 2016-2020 will be 0.

Loss from discontinuous operation assumed as 50 since best buy will continue to sell its unprofitable business by closing some store in Canada.

Common equity, accumulated other comprehensive income and additional paid in capital are consistent since 2015.

Weighted-average common shares outstanding (basic and diluted) is assumed consistent since 2005.

Foreign currency exchange assume as 0

Unrealized gain (loss) on available-for-sale investments and Reclassification of (gains) losses on available-for-sale investments into earnings assume as 0

Balance Sheet

Assume Short-term investment will increase 50 and 100 respectively in 2016 and 2017 to support its operations.

Current assets held for sale: 0. assume no current assets held for sale during 2016-2020.

Non-controlling inteest assume as 0

Non controlling interest, Long-Term Liabilities held for sale assume as 0.

Common stock, additional paid capital are assumed consistent since 2016.

Statement of Cash Flow

Amortization: We assume that there will be no definite-lived tradenames to amortize in 2016 and thereafter, so amortization expense will be 0.

Amortization of definite-lived intangible assets, goodwill impairments, (gain)loss on sale of business, stock-based compensation, realized gain on sale of investment, deferred income taxrs, excess tax benefit from stock-basked compensation are assumed as 0 since 2016

Acquistion of business, proceeds from sale of business, settlement of net investment hedge are assumed as 0 since 2016.

Payment to noncontrolling interest, acquisition of noncontrolling interests, excess tax benefit from stock-based compensation are assumed as 0 because there were occasionly generated in the history data.

Consolidated Statements of Earnings (Pro-forma)$ in millions, except per share and share amounts

Fiscal Year Ended February 26,2011 March 3,2012Feb 2, 2013 Feb 1, 2014 Jan 31, 2015 Avg 2016 2017 2018 2019 2020

Revenue 49,747 50,705 39,827 40,611 40,339 40,243 42,672 45,247 47,978 50,873

Cost of goods sold 37,197 38,113 30,528 31,212 31,292 76% 30,473 32,338 34,297 36,508 38,711

Restructuring charges - cost of goods sold 9 19 1 - - - - - - -

Gross profit 12,541 12,573 9,298 9,399 9,047 9,770 10,334 10,950 11,470 12,162

Selling, general and administrative expenses 10,029 10,242 8,181 8,106 7,592 19.96% 8,031 8,516 9,030 9,575 10,153

Restructuring charges 138 39 414 149 5 100 - - - -

Goodwill impairments - 1,207 822 - - - - - - -

Operating income 2,374 1,085 (119) 1,144 1,450 1,639 1,818 1,920 1,895 2,009

Other income (expense)

Gain on sale of investments - 55 - 20 13 149 - - - -

Investment income and other 43 37 20 19 14 1.44% 16 17 22 32 37

Interest expense (86) (134) (99) (100) (90) 6.38% (90) (39) (40) (79) (82)

Earnings from continuing operations before income tax expense 2,331 1,043 (198) 1,083 1,387 1,714 1,795 1,902 1,848 1,964

Income tax expense 779 709 269 388 141 40.49% 694 727 770 748 795

Equity in income (loss) of affiliates 2 (4) - - - - - - - -

Net earnings (loss) from continuing operations 1,554 330 (467) 695 1,246 1,020 1,068 1,132 1,100 1,169

Loss from discontinued operations (Note 2), net of tax benefit of $0, $31, and $30 (188) (308) 47 (172) (11) (50) - - - -

Net earnings (loss) including noncontrolling interests 1,366 22 (420) 523 1,235 970 1,068 1,132 1,100 1,169

Net earnings from continuing operations attributable to noncontrolling interests (127) (1,387) (2) - - - - - - -

Net (earnings) loss from discontinued operations attributable to noncontrolling interests38 134 (19) 9 (2) - - - - -

Net earnings (loss) attributable to Best Buy Co Inc shareholders 1,277 (1,231) (441) 532 1,233 970 1,068 1,132 1,100 1,169

Basic earnings (loss) per share attributable to Best Buy Co Inc shareholders

Continuing operations 4 (3) (1) 2 4 5 5 5 5 6

Discontinued operations (0) (0) 0 (0) (0) - - - - -

Diluted earnings (loss) per share 3 (3) (1) 2 4 5 5 5 5 6

Diluted earnings (loss) per share attributable to Best Buy Co Inc shareholders

Continuing operations 3 (3) (1) 2 4 5 5 5 5 6

Discontinued operations (0) (0) 0 (0) (0) - - - - -

Diluted earnings (loss) per share 3 (3) (1) 2 3 5 5 5 5 6

Weighted-average common shares outstanding (in millions)

Basic 406 366 339 342 350 350 350 350 350 350

Diluted 417 366 339 348 354 354 354 354 354 354

Net earnings (loss) including noncontrolling interests 22 (420) 523 1,235 970 1,068 1,132 1,100 1,169

Foreign currency translation adjustments (21) 15 (147) (103) - - - - -

Unrealized gain (loss) on available-for-sale investments (26) 2 6 (3) - - - - -

Reclassification of foreign currency translations adjustments into earnings due to sale of business- - 654 - - - - - -

Reclassification of (gains) losses on available-for-sale investments into earnings (48) - 2 (4) - - - - -

Comprehensive income (loss) including noncontrolling interests (73) (403) 1,038 1,125 970 1,068 1,132 1,100 1,169

Comprehensive income attributable to noncontrolling interests (1,241) (27) (126) (2) - - - - -

Comprehensive income (loss) attributable to Best Buy Co Inc shareholders (1,314) (430) 912 1,123 970 1,068 1,132 1,100 1,169

Forecast YearHistorical Year

Consolidated Balance Sheets (Pro-forma)$ in millions, except per share and share amounts

Fiscal Year Ended Feb 26,2011 March 3, 2012 Feb 2, 2013 Feb 1, 2014 Jan 31, 2015 Avg 2016 2017 2018 2019 2020

Assets

Current Assets

Cash and cash equivalents 1,103 1,199 1,826 2,678 2,432 4.2% 1,680 1,782 1,889 2,003 2,124

Short-term investments 22 - - 223 1,456 0.8% 359 428 348 369 391

Receivables, net 2,348 2,288 2,704 1,308 1,280 4.5% 1,806 1,915 2,031 2,153 2,283

Merchandise inventories 5,897 5,731 6,571 5,376 5,174 13.0% 5,230 5,545 5,880 6,235 6,611

Other current assets 1,103 1,079 946 900 703 2.1% 861 913 968 1,026 1,088

Current assets held for sale - - - - 684 - - - - -

Total current assets 10,473 10,297 12,047 10,485 11,729 9,936 10,583 11,115 11,786 12,497

Property and Equipment

Land and buildings 766 775 756 758 611 9.2% 667 707 750 795 843

Leasehold improvements 2,318 2,367 2,386 2,182 2,201 28.8% 2,084 2,209 2,343 2,484 2,634

Fixtures and equipment 4,701 4,981 5,120 4,515 4,729 60.5% 4,374 4,638 4,918 5,215 5,530

Property under capital lease 120 129 113 120 119 1.5% 109 116 123 130 138

Gross PPE 7,905 8,252 8,375 7,575 7,660 18.0% 7,234 7,670 8,133 8,624 9,145

Less accumulated depreciation 4,082 4,781 5,105 4,977 5,365 6,082 6,843 7,650 8,505 9,412

Net property and equipment 3,823 3,471 3,270 2,598 2,295 1,151 827 484 119 (267)

Goodwill 2,454 1,335 528 425 425 425 425 425 425 425

Intangibles, Net 336 359 334 101 57 57 57 57 57 57

Other Assets 435 403 608 404 583 1.1% 443 469 498 528 559

Equiy and other investment 328 140 - - - - - - - -

Non-current assets held for sale - - - 167 - - - - -

Total Assets 17,849 16,005 16,787 14,013 15,256 12,012 12,361 12,578 12,915 13,271

Liabilities and Equity

Current Liabilities

Accounts payable 4,894 5,364 6,951 5,122 5,030 12.4% 4,977 5,278 5,596 5,934 6,292

Unredeemed gift card liabilities 474 456 428 406 411 1.0% 396 420 445 472 500

Deferred revenue - 451 399 326 0.5% 214 227 241 255 270

Accrued compensation and related expenses 570 539 520 444 372 1.1% 445 472 500 530 562

Accrued liabilities 1,471 1,685 1,188 873 782 2.7% 1,091 1,157 1,227 1,301 1,380

Accrued income taxes 256 288 129 147 230 0.5% 191 203 215 228 241

Current portion of long-term debt 557 43 547 45 41 1.5% 185 191 194 199 205

Current liabilities held for sale 441 480 596 - 585 1.0% 382 405 430 456 483

Total current liabilities 8,663 8,855 10,810 7,436 7,777 7,881 8,351 8,847 9,375 9,934

Long-Term Liabilities 1,183 1,099 1,109 976 881 2.4% 955 1,012 1,073 1,138 1,207

Long-Term Debt 711 1,685 1,153 1,612 1,580 8.4% 1,013 1,043 1,061 1,089 1,120

Contingencies and Commitments (Note 12)

Long-Term Liabilities held for sale - - - - 18 - - - - -

Equity

Best Buy Co Inc Shareholders' Equity

Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none - - - - - - -

Common stock, $0.10 par value: Authorized - 1.0

billion shares; Issued and outstanding - 39 34 34 35 35 35 35 35 35 35

Additional paid-in capital 18 - 54 300 437 437 437 437 437 437

Retained earnings 6,372 3,621 2,861 3,159 4,141 1,309 1,101 743 459 157

Accumulated other comprehensive income 173 90 112 492 382 382 382 382 382 382

Total Best Buy Co Inc shareholders' equity 6,602 3,745 3,061 3,986 4,995 2,163 1,955 1,597 1,313 1,011

Noncontrolling interests 690 621 654 3 5 - - - - -

Total equity 7,292 4,366 3,715 3,989 5,000 2,163 1,955 1,597 1,313 1,011

Total Liabilities and Equity 17,849 16,005 16,787 14,013 15,256 12,012 12,361 12,578 12,915 13,271

Historical Year Forecast Year

Consolidated Statement of Cash Flows (Pro-forma)$ in millions, except per share and share amounts

Operating Activities

Net earnings (loss) including noncontrolling interests 1,366 22 (420) 523 1,235 970 1,068 1,132 1,100 1,169

Adjustments to reconcile net earnings (loss) to total cash provided by operating activities:

Depreciation 896 897 794 701 656 9.92% 717 761 807 855 907

Amortization of definite-lived intangible assets 82 48 38 15 - - - - - -

Restructuring charges 222 287 449 259 23 (100)

Goodwill impairments - 1,207 822 - - - - - - -

(Gain) Loss on sale of business - - - 143 (1) (50) - - - -

Stock-based compensation 121 120 107 90 87 - - - - -

Realized gain on sale of investment - (55) - - - - - - - -

Deferred income taxes (134) 28 (19) (28) (297)

Excess tax benefit from stock-based compensation (11) - - - - - - - - -

Other, net 11 26 41 62 8 (158) (52) (55) (58) (62)

Changes in operating assets and liabilities:

Receivables (371) 41 (551) 7 (19) (526) (109) (116) (123) (130)

Merchandise inventories (400) 120 (912) 597 (141) (56) (316) (335) (355) (376)

Other assets 40 (24) (65) (70) 29 140 (27) (28) (30) (32)

Accounts payable (443) 574 1,735 (986) 434 (53) 300 318 338 358

Other liabilities (156) (23) (339) (273) (164) 157 169 177 190 201

Income taxes (33) 25 (226) 54 85

Total cash provided by operating activities 1,190 3,293 1,454 1,094 1,935 1,043 1,796 1,901 1,917 2,035

Investing Activities

Additions to property and equipment, net of $14, $13 and $29 non-cash capital expenditures (744) (766) (705) (547) (561) 426 (437) (463) (491) (520)

Purchases of investments (267) (112) (13) (230) (2,804) 1,097 (69) 80 (21) (22)

Sales of investments 415 290 69 50 1,580 149 - - - -

Acquisition of businesses, net of cash acquired - (174) (31) - - - - - - -

Proceeds from sale of business, net of cash transferred 21 - 25 206 39 - - - - -

Change in restricted assets (2) 40 101 5 29 - - - - -

Settlement of net investment hedge 12 - - - - - - - - -

Other, net (4) (2) 16 (1) 5 262 - - - -

Total cash used in investing activities (569) (724) (538) (517) (1,712) 1,934 (505) (383) (512) (543)

Financing Activities

Repurchase of common stock (1,193) (1,500) (122) - - - - - - -

Issuance of common stock 179 67 25 171 50 - - - - -

Dividends paid (237) (228) (224) (233) (251) (3,802) (1,276) (1,490) (1,384) (1,470)

Repayments of debt (3,120) (3,412) (1,614) (2,033) (24) - - - - -

Proceeds from issuance of debt 3,021 3,921 1,741 2,414 - 29 18 28 30

Payment to Noncontrolling interest - (1,303) - - - - - - - -

Acquisition of noncontrolling interests (21) - - - - - - - - -

Excess tax benefit from stock-based compensation 11 - - - - - - - - -

Other,net 3 (23) - - 2 74 58 61 65 69

Total cash provided by (used in) financing activities (1,357) (2,478) (211) 319 (223) (3,729) (1,189) (1,410) (1,291) (1,372)

Effect of Exchange Rate Changes on Cash 13 5 (4) (44) (52) - - - - -

Increase (Decrease) in Cash and Cash Equivalents (723) 96 701 852 (52) (752) 101 108 114 121

Adjustment for Fiscal Year-end Change (Note 1) - - (74) - - - - - - -

Increase (Decrease) in Cash and Cash Equivalents After Adjustment (723) 96 627 852 (52) (752) 101 108 114 121

Cash and Cash Equivalents at Beginning of Year 1,826 1,103 1,199 1,826 2,678 2,432 1,680 1,782 1,889 2,003

Cash and Cash Equivalents at End of Year 1,103 1,199 1,826 2,678 2,626 1,680 1,782 1,889 2,003 2,124

Less Cash and Cash Equivalents Held for Sale - - - - (194) - - - - -

Cash and Cash Equivalents at End of Period, Excluding Held for Sale 1,103 1,199 1,826 2,678 2,432 1,680 1,782 1,889 2,003 2,124

Supplemental Disclosure of Cash Flow Information

Income taxes paid 882 568 478 332 355 - - - - -

Interest paid 68 89 106 82 81 81 81 81 81 81

Historical Year Forecast Year

Operating Lease

Assumption: Avg asset life of 30 years

Rd 4.925%

Year Min Lease Payment PV factor PV Year Min Lease Payment PV factor PV

2016 873 0.953059875 832.0212704 2015 1027 0.953059875 978.7924911

2017 771 0.908323124 700.3171289 2016 931 0.908323124 845.6488288

2018 641 0.865686323 554.904933 2017 807 0.865686323 698.6088626

2019 499 0.825050898 411.7003983 2018 656 0.825050898 541.2333893

2020 365 0.786322906 287.0078606 2019 496 0.786322906 390.0161612

Thereafter 727 11.16595219 324.7058897 Thereafter 1116 11.16595219 498.4481057

PV 3110.657481 PV 3952.747839

remining year 25

25 constant yr payment 29.08 25 constant yr payment 44.64

Rental Expense in 2015 850.00

Int Exp 173.94

Depreciation 676.06

CapEx -166.03

2015 2014

Cost of Debt

Issuance Face Value Estimated Fair Value Face Value Estimated Fair Value Stated Int Rate

2016 Notes 349 346 349 346 3.75%

2018 Notes 500 495 500 495 5.00%

2021 Notes 649 643 649 643 5.50%

Total 1498 1484 1498 1484

Possible Assumption: rd = weighted average coupon rate

Fair Value Rate Weight Weighted rate

Long term debt:

2016 Notes 346 3.75% 23.32% 0.874%

2018 Notes 495 5.00% 33.36% 1.668%

2021 Notes 643 5.50% 43.33% 2.383%

Sum of all debt with explicit interest rates 1484 100.00%

weighted average borrowing rate 4.925%

Assumption Source

rF 2.25% Govt Bond 10yr Bloomberg

rM 9.35% S&P 500 10yr Vanguard

Beta 1.85 Average Multiple

Mkt Premium 7.10%

CAPM 15.41%

Beta Estimate Source

1.86

1.86

1.84

Google Finance

MSN Money

Reuters

*Yahoo Finance Beta of 3.09 discarded as outlier

2015 2014

Based on fair values of boowings:

Cost of Equity

WACC Interation

rf 2.25% rd 4.925%

rm-rf 7.10%Short term borrowings 0 Guess Equity value in 2020 8824

Beta 1.85 Long term debt 1484 Debt Value 2020 4230

rE(CAPM) 15.41% Total on B/S debt 1484 Enterprise Value 2020 13054

Shares outstanding 351,468,000 Oper. lease debt 3111

Obs. Price, 5/01/2015 35.18 Combined Debt 4595 We 67.59%

Market value equity 12,364,644,240 Wd 32.41%

Market value equity (in miilions) 12365 WACC 11.44%

Enterprise Value 16959 Growth rate 2.00%

wE 72.91% FCFU 2020 1208

wD 27.09%

Tax rate (Notes 10) 35.80% Implied Enterprise Value (TV) 13054

Rwacc 12% Less: Debt 2020 -4230

Equity Value 2020 8824

As assumed, there is no non-controlling interest and prefered stock Difference tp initial guess 0

Best Buy's WACC (operating asset view with Operating Lease)

Equity Debt

Best Buy FCF Valuation (OA view)Assumption: Interest expense component of rental expense, depreciation and capital expenditure all assume the same as 2015 in the following year.

Effective tax rate (Notes 10) 35.80%

2,015 2,016 2,017 2,018 2,019 2,020 TV

CFO 1,935 1,043 1,796 1,901 1,917 2,035

Less Change in required cash 246 752 (101) (108) (114) (121)

Plus: Cash interest paid 81 81 81 81 81 81

Less: Interest tax shield

Tax rate 35.80% 0 0 0 0 0

Interest expense (90) (90) (39) (40) (79) (82)

ITS (32) (32) (32) (14) (14) (28) (29)

Interest expense component of rental expense 174 174 174 174 174 174

Depreciation component of rental expense 676 676 676 676 676 676

Plus: Rental Expense of operating leases 850 850 850 850 850 850

Less: Interest tax shield

Tax rate 0 0 0 0 0 0

Interest expense component of rental expense 174 174 174 174 174 174

ITS (62) (62) (62) (62) (62) (62)

Less: Capital expenditures (CFI) (1,712) (1,712) (1,712) (1,712) (1,712) (1,712)

Less: Capital expenditures in leased assets 166 166 166 166 166 166

FCFU 1,472 1,085 1,003 1,101 1,097 1,208

FCFU (calculated above) 1,472 1,085 1,003 1,101 1,097 1,208

Less: Cash interest paid (81) (81) (81) (81) (81) (81)

Plus: Interest tax shield 32 32 14 14 28 29

Less: Interest Expense for operating leases (174) (174) (174) (174) (174) (174)

Plus: Interest tax shield 62 62 62 62 62 62

(assume all cash)

(Uses)/sources of non-common equity financing:

Proceeds from issuance of long-term debt - - 29 18 28 30

Principal payments on long-term debt (24) - - - - -

(Payments)/proceeds from short-term borrowings - - - - - -

Change in debt under operating leases (842) (842) (842) (842) (842) (842)

Other (assumed non-common-equity transaction) 2 74 58 61 65 69

FCFCE 1,919 1,242 1,073 1,262 1,281 1,509

rE 15.41%

rWACC 12.09%

g 2.00%

Free cash flow valuation:

FCFU valuation (WACC method) 2,015 2,016 2,017 2,018 2,019 2,020 TV

Cash managed optimally

FCFU 1,085 1,003 1,101 1,097 1,208 12,209

PV of FCFUs (@WACC) 968 798 782 695 683 6,900

FCFU 1,208

(1+g)/(rWACC-g) 10

Perpetuity value 12,209

Plus: Excess cash

Cash balance, 9/28/2014 n/a

Required cash n/a

Excess cash n/a

Enterprise value 10,826

Less: Non-common equity

Less: FV debt 1,484

Non-controlling interest -

Equity value 9,342

# Shares outstanding 351

Intrinsic price 27

FCFCE 1,919 1,242 1,073 1,262 1,281 1,509 11,478

PV of FCFCEs 1,076 805 821 722 737 5,606

(1+g)/(rE-g) 8

Perpetuity value 11,478

Plus: Excess cash n/a

Equity value 9,767

Shares outstanding 351

Intrinsic price 28

g 2.00%

rWACC 11.44%

2015 2016 2017 2018 2019 2020 TV

FCFU 1,085.34 1,003.07 1,101.45 1,096.88 1,207.80 13,050.42

PV of FCFUs (@WACC) 973.93 807.70 795.87 711.20 702.73 7,593.10

FCFU 1,207.80

(1+g)/(rWACC-g) 10.81

Perpetuity value 13,050.42

Plus: Excess cash

Cash balance, 9/28/2014

Required cash

Excess cash -

Enterprise value 11,584.53

Less: Non-common equity

Less: FV debt 1,484.00

Non-controlling interest

Equity value 10,100.53

# Shares outstanding 351.47

Intrinsic price 28.74

FCFU valuation with WACC Iteration

EVA Valuationin millions

Year 2016 2017 2018 2019 2020 TV

Net Income, including NCI 970 1,068 1,132 1,100 1,169

Interest expense (90) (39) (40) (79) (82)

-TS IntExp 32 14 14 28 29

NOPAT t 912 1,043 1,106 1,049 1,117

t-1 2,015 2,016 2,017 2,018 2,019

Debt 1,621 1,199 1,233 1,255 1,289

NCI 5 - - - -

Equity 4,995 2,163 1,955 1,597 1,313

IC t-1 6,621 3,361 3,188 2,852 2,601

rwacc 12.09%

EVA 112 637 720 704 802 8,107

1/(1+rwacc)^n 0.89 0.80 0.71 0.63 0.57 0.57

PV of EVAs 100 507 512 446 453 4,582

Sum of PVs 6,599

IC at Valuation Date 6,621

Enterprise Value 13,220

Less: Debt2015(fair value) (1,484)

Less: NCI (5)

Equity Value 11,731

# of shares(in million) 351

Value per share 33

Multiples Source: Yahoo finance.yahoo.com/q/co?s=BBY

$ in millions except share price and data

Company Amazon Apple Target Wal-Mart Staples

P/E Ratio N/A 15.64 N/A 15.64 78.43

Observed Share Price $431 $126 $81 $79 $16.47

Shares Outstanding $465,686,047 $5,761,242,651 $639,153,570 $3,225,557,244 640,558,591

Market Cap $200,720 $725,110 $51,650 $254,690 $10,550

Debt $8,265 $28,987 $12,705 $43,692 $1,024

Enterprise Value $208,985 $754,097 $64,355 $298,382 $11,574

Sales Revenue $88,988 $182,795 $72,618 $485,651 $22,492

EBITDA $99 $53,483 $4,535 $27,260 $317 Average Average Tech Average Retail

Ent Val to Sales Multiple 2.35 4.13 0.89 0.61 0.51 1.99 3.24 0.75

Ent Val to EBITDA Mult 2,110.96 14.10 14.19 10.95 36.48 13.08 *Amazon excluded as outlier

P/E Ratio 10.54 EV/Sales Mutiple EV/EBITDA Multiple

Observed Share Price $36.80 Sales Revenue 40,339.00$ 1,387.00$

Shares Outstanding 352,445,652 Ent Val Multiple 0.51 13.08 Select Valuation

Market Cap $12,970 Enterprise Value 20,757.42$ 18,140.24$ Ent Val Sales Avg 1.99 224.47$

Debt $1,580 -NonControlling Int - - Ent Val Sales Tech 3.24 367.17$

Enterprise Value $14,550 -Current Liabilities Debt 41.00$ 41.00$ Ent Val Sales Retail 0.75 81.78$

Sales Revenue $40,339 -Long Term Debt 1,484.00$ 1,484.00$ Ent Val Sales Wal-Mart 0.61 66.18$

EBITDA $1,477 -Preferred Shares -$ -$ Ent Val Sales Apple 4.13 469.14$

Ent Val to Sales Multiple 0.36 Equity Value 19,232.42$ 16,615.24$ Ent Val Sales Staples 0.51 54.72$

Ent Val to EBITDA Mult 9.85 Shares Outstanding 351,468,000 351,468,000

Intrinsic Share Price 54.72$ 47.27$

Ratio Analysis

Key Ratios Best Buy Apple Wal-Mart Staples

Profit Margin 22.43% 38.59% 24.83% 25.79%

ROA 7.36% 17.04% 8.03% 1.30%

ROE 22.46% 35.42% 20.10% 2.54%

P/E 10.54 15.64 15.64 78.43

Asset Turnover 2.64 0.79 2.38 2.18

Financial Leverage 3.05 2.08 2.50 1.94

Sales to NI Efficiency 2.78% 21.61% 3.37% 0.60%

Company Best Buy Amazon Apple Target Wal-Mart Staples

Total Assets 15,256.00$ 54,505.00$ 231,839.00$ 41,404.00$ 203,706.00$ 10,314$

Total Equity 5,000.00$ 10,741.00$ 111,547.00$ 13,997.00$ 81,394.00$ 5,305$

Revenue 40,339.00$ 88,988.00$ 182,795.00$ 72,618.00$ 485,651.00$ $22,492

Gross Profit 9,047.00$ 26,236.00$ 70,537.00$ 21,340.00$ 120,565.00$ 5,801.04$

Profit Margin 0.22 0.29 0.39 0.29 0.25 0.26

Net Income 1,123.00$ (241.00)$ 39,510.00$ (1,636.00)$ 16,363.00$ $135

Sales to NI Efficiency 0.03 N/A 0.22 N/A 0.03 0.01

ROA (Current) 0.07 N/A 0.17 N/A 0.08 0.01

ROA (year 2020) 0.04 N/A N/A N/A N/A N/A

ROE (Current) 0.22 N/A 0.35 N/A 0.20 0.03

ROE (year 2020) 0.50 N/A N/A N/A N/A N/A

Price to Earnings 10.54 N/A 15.64 N/A 15.64 78.43

Asset Turnover (Current) 2.64 1.63 0.79 1.75 2.38 2.18

Financial Leverage (Current) 3.05 5.07 2.08 2.96 2.50 1.94

Best Buy - Projected ValueBest Buy - Current Val

Ent Val Sales Staples

Sensitivity Analysis: Change the growth rate of 2017-2020 and thereafter to see how the value of Best Buy will be affected.

FCFU FCFCE EVA Wal-Mart Ent Val Staples Ent Val Apple Ent Val

% 2017-2020 Growth Rate Retained Sales Rev

26.58 27.79 33.38 $65.51 $54.05 $468.54

5.00% 25.65 25.97 33.13 50.00% $30.58 24.86$ $232.10

5.50% 26.09 26.84 33.25 55.00% $34.08 27.78$ $255.75

6.00% 26.55 27.73 33.37 60.00% $37.57 30.70$ $279.39

6.50% 27.00 28.62 33.49 70.00% $44.55 36.53$ $326.68

7.00% 27.46 29.52 33.62 80.00% $51.54 42.37$ $373.97

7.50% 27.92 30.43 33.75 90.00% $58.52 48.21$ $421.26

8.00% 28.39 31.36 33.88 100.00% $65.51 54.05$ $468.54

FCFU FCFCE EVA

% Thereafter Growth Rate Worst Average Best

26.58 27.79 33.38 FCFU 25.56 26.58 28.95

1.50% 25.56 27.14 32.70 FCFCE 25.97 27.79 29.24

1.75% 26.06 27.46 33.03 EVA 32.70 33.38 34.95

2.00% 26.58 27.79 33.38 Max Enterprise Value (million) 16,514.87

2.25% 27.13 28.13 33.74

2.50% 27.70 28.49 34.12

2.75% 28.31 28.86 34.53

3.00% 28.95 29.24 34.95

Cite: Best Buy's Turnaround Strategy Has One Huge Paradox

Read more: http://www.businessinsider.com/best-buys-strategy-is-a-paradox-2014-4#ixzz3ZzuvfHAa

Valuation Summary