my valuation of p&g - nyu stern school of businessadamodar/pdfiles/eqnotes/pg/p&gv… ·...

Date of valuation Sep-12Company name P&G There should be a check against the iteration box. If there is not, you will get circular reasoning errors.

Numbers from your base year below ( in same units)This year Last year

Industry Household ProductsRevenues $ 83,680.00 ###Operating income or EBIT $ 13,292.00 ###Book value of equity $ 64,035.00 ###Book value of debt $ 29,778.00 ###Do you have operating lease commitments? Yes Cash and cross holdings $ 4,436.00 $ 2,768.00 Non-operating assets $ - $ - Minority interests $ 596.00 $ 361.00 Number of shares outstanding = 2754.28Current stock price = $ 68.91 Effective tax rate = 27.10%Marginal tax rate = 35.00%The value drivers below:Compounded annual revenue growth rate over next 5 y 3.00%Target pre-tax operating margin (EBIT as % of sales in y 16.00%Sales to capital ratio (for computing reinvestment) = 0.94Market numbers Riskfree rate 1.60%Initial cost of capital = 9.28%Other inputsDo you have employee options outstanding? YesNumber of options outstanding = 353.09Average strike price = $53.83Average maturity = 5.00Standard deviation on stock price = 20.00%

Default assumptions. In stable growth, I will assume that your firm will have a cost of capital similar to that of typical mature companies (riskfree rate + 4.5%)Do you want to override this assumption = No Mature companies generally see their risk levels approach the averageIf yes, enter the cost of capital after year 10 = 7% Though some sectors, even in stable growth, may have higher risk.I will assume that your firm will earn a return on capital equal to its cost of capital after year 10. I am assuming that whatever competitive advantages you have today will fade over time.Do you want to override this assumption = Yes Mature companies find it difficult to generate returns that exceed the cost of capitalIf yes, enter the return on capital you expect after year 10% But there are significant exceptions among companies with long-lasting competitive advantages.I will assume that your firm has no chance of failure over the foreseeable future.Do you want to override this assumption = No Many young, growth companies fail, especially if they have trouble raising cash. Many distressed companies fail, because they have trouble making debt payments.If yes, enter the probability of failure = 20% Tough to estimate but a key input.What do you want to tie your proceeds in failure to? V B: Book value of capital, V= Estimated fair value for the companyEnter the distress proceeds as percentage of book or fai 50% This can be zero, if the assets will be worth nothing if the firm fails.I will assume that your effective tax rate will adjust to your marginal tax rate by your terminal year. If you override this assumption, I will leave the tax rate at your effective tax rate.Do you want to override this assumption = NoI will assume that you have no losses carried forward from prior years ( NOL) coming into the valuation. If you have a money losing company, you may want to override tis.Do you want to override this assumption = No Check the financial statements.If yes, enter the NOL that you are carrying over into yea $250.00 An NOL will shield your income from taxes, even after you start making money.

Important: Before you run this spreadsheet, go into preferences in Excel and check under Calculation options

C5

Aswath Damodaran: If you are using trailing 12-month data, it is best if the last year is the 12-month period just prior to the one that you are using. Thus, if you are looking at June 2011-June 2012, your trailing 12 month for the income statement numbers will be June 2010-June 2011 and your balance sheet numbers should be as of June 2011.

B6

Aswath Damodaran: If you are in multiple businesses, you can construct your own weighted averages using the industry average table from this spreadsheet and your company's business breakdown.

B7

Aswath Damodaran: Enter the revenues from the most recent period (you can either use annual or the trailing 12 months). If your company had no revenues, enter a very small positive number. (You need a base for your growth rate)

B8

Aswath Damodaran: Enter the operating income or EBIT from the most recent time period, even if that number is negative. If you have operating leases, enter the adjusted operating income (see the operating lease worksheet for the amount you have to adjust operating income by).

B9

Aswath Damodaran: Enter the book value of equity (total) from the end of the most recent time period (i.e. the most recent balance sheet). This book equity will include everything - paid in capital, retained earnings etc. and may even be negative for companies that have been losing money for a while.

B10

Aswath Damodaran: Enter the book value of interest bearing debt (short and long term) at your company from the most recent balance sheet. (Do not include accounts payable, supplier credit or other non-interest bearing liabilities.) If you have operating leases, enter the debt adjusted to include these leases (see operating lease worksheet for the amount you have to add to debt).

B12

Aswath Damodaran: Enter the cash balance from the most recent balance sheet. This should include marketable securities.

B13

Aswath Damodaran: Enter the market value of those non-cash assets whose earnings are (and will never) show up as part of operating income. The most common non-operating assets are minority holdings in other companies (which are not consoldiated). You can find the book value of these holdings on the balance sheet, but see if you can convert to market value. (I apply a price to book ratio, based on the sector that the company is in to the book value).

B14

Aswath Damodaran: Enter the "market" value of minority interests. This is a uniquely accounting item and will be on the liability side of your company's balance sheet. It reflects the requirement that if you own more than 50% of another company or have effective control of it, you have to consolidate that company's statements with yours. Thus, you count 100% of that subsidiaries assets, revenues and operating income with your company, even if you own only 60%. The minority interest reflects the book value of the 40% of the equity in the subsidiary that does not belong to you. Again, it is best if you can convert the book value to a market value by applying the price to book ratio for the sector in which the subsidiary operates

B15

Aswath Damodaran: Enter the most recent update you have on the number of shares. If you have different classes of shares, aggregate them all and enter one number. Count restricted stock units (RSUs) as shares but don't count shares underlying employee options.

B16

Aswath Damodaran: Enter the most recent stock price (how about today's?) in here.

B17

Aswath Damodaran: Enter your effective (not marginal) tax rate for your firm. You will find this in your company's annual report. If you cannot, you can compute it as follows, from the income statement: Effective tax rate = Taxes paid/ Taxable income If your effective tax rate varies across years, you can use an average.

B18

Aswath Damodaran: This is a statutory tax rate. I use the tax rate of the country the company is domiciled in. See worksheet embedded in this spreadshseet for country tax rates.

B20

Aswath Damodaran: I don't have a crystal ball but you should look at a. Revenue growth in your company in recent years b. Your company's revenues, relative to the overall market size and larger players in the sector. Suggestion: Check your revenues in year 10 against the overall market and see what market share are you giving your company. Check your company's revenues against other companies in the sector. Note that this number can be negative for a declining firm.

B21

Aswath Damodaran: You should start by looking at your company's current pre-tax operating margin (Divide cell B4 by cell B3 on this page) but also look at the average for your industry. (You can check my estimates of industry averages in the last worksheet on this spreadsheet.)

B22

Aswath Damodaran: You are probably wondering what this is but it is how I compute how much you are going to reinvest to keep your business growing in future years. The higher you set this number, the more efficiently you are growing and the higher the value of your growth. Again, look at your company's current number (divide cell B3 by the sum of cells B5 and B6). Look at the industry averages as well in the worksheet.

B24

Aswath Damodaran: This should be today's long term riskfree rate. If you are working with a currency where the government has default risk, clean up the government bond rate to make it riskfree (by subtracting the default spread for the government).

B25

Aswath Damodaran: Enter the current cost of capital for your firm. If you don't know what it is, you can use the worksheet to compute it.

B28

Aswath Damodaran: Check your company's annual report or 10K. If it does have options outstanding, enter the total number here (vested and non vested, in the money and out…)

B29

Aswath Damodaran: Enter the weighted average strike price of your options. (Should be in your 10K or annual report.)

B30

Aswath Damodaran: The weighted average maturity of your options should be reported in your financial statements.

B31

Aswath Damodaran: If you have a standard deviation for your stock, enter that number. If not, use the industry average standard deviation from the worksheet.

B35

Aswath Damodaran: Mature companies tend to have costs of capital closer to the market average. While the riskfree rate + 4.5% is a close approximation of the average, you can use a slightly higher number (riskfree rate + 6%) for mature companies in riskier businesses and a slightly lower number (risfree rate + 4%) for safer companies.

B38

Aswath Damodaran: The default assumption is that competitive advantages will fade to zero over time. While this is a good assumption for many firms (about 7 in 10), there are some firms with sustainable competitive advantages (brand name, for instance), where the excess returns may continue beyond year 10. If your firm is one of those, you can enter a return on capital higher than your cost of capital in the cell below. Just don't get carried away. At the maximum, the excess return should not exceed 5% for a mature firm.

B39

Aswath Damodaran: Even if you believe your firm has significant competitive advantages, don't set this number to more than 5% more than your cost of capital.

B41

Aswath Damodaran: Companies at either end of the life cycle - young, growth and old, declining firms have a significant likelihood of failure. While we tend to ignore this in conventional DCF, it is worth thinking about whether you want to estimate a probability of failure. It is not easy to do but it can be done by looking at either history (with young, growth companies) or the debt market (with distressed companies).

B42

Aswath Damodaran If you want to look at ways of estimating this probability, try these papers I have on the topic: For young growth companies: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1418687 For declining, distressed companies: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1428022

B43

Aswath Damodaran: If the firm fail and has to liquidate its assets, you need to specify what the liquidation proceeds will be tied to. For young growth companies, I would tie it to value and with distressed firms (especially ones with significant assets in place), I would use book value.

B44

Aswath Damodaran: You will generally not get 100% of fair value. How much less than 100% you get will depend on whether there are lots of potential buyers for your assets and how much of a hurry you are in to liquidate. It may well be zero for a young growth company with no tangible assets.

B46

Aswath Damodaran: Companies generally pay less than the marginal tax rate on their income. Some of that is due to tax deferral and others to quirks in the tax law. Over time, the conservative assumption is to require the tax rate to move towards the marginal tax rate. However, if you believe that your firm's tax benefits are permanent, you can override this assumption.

B48

Aswath Damodaran: If your company has been losing money for a while, there will be accumulated losses from prior periods. Check your financial statements.

B49

Aswath Damodaran: This is the NOL from prior years carried forward into this year.

There should be a check against the iteration box. If there is not, you will get circular reasoning errors.

10K: Page # Concerns3

66666767 51, 93, 95103 103676767

3 & 68 113Current Computed numbers: Here is what your company's numbers look like, relative to industry.

32, 66,100100 Revenue growth in the most recent year =

Pre-tax operating margin in the most recent year57 Sales to capital ratio in most recent year =30 Return on invested capital in most recent year=

Standard deviation in stock prices =Cost of capital =

Current4

91

In stable growth, I will assume that your firm will have a cost of capital similar to that of typical mature companies (riskfree rate + 4.5%)Mature companies generally see their risk levels approach the averageThough some sectors, even in stable growth, may have higher risk.

I will assume that your firm will earn a return on capital equal to its cost of capital after year 10. I am assuming that whatever competitive advantages you have today will fade over time.Mature companies find it difficult to generate returns that exceed the cost of capitalBut there are significant exceptions among companies with long-lasting competitive advantages.

Many young, growth companies fail, especially if they have trouble raising cash. Many distressed companies fail, because they have trouble making debt payments.Tough to estimate but a key input.B: Book value of capital, V= Estimated fair value for the companyThis can be zero, if the assets will be worth nothing if the firm fails.

I will assume that your effective tax rate will adjust to your marginal tax rate by your terminal year. If you override this assumption, I will leave the tax rate at your effective tax rate.

I will assume that you have no losses carried forward from prior years ( NOL) coming into the valuation. If you have a money losing company, you may want to override tis.Check the financial statements.An NOL will shield your income from taxes, even after you start making money.

Important: Before you run this spreadsheet, go into preferences in Excel and check under Calculation options

Computed numbers: Here is what your company's numbers look like, relative to industry.Company Industry (US data)

3.18% 16.13%15.88% 17.38%

0.94 1.139.93% 14.52%

62.24%7.32%

Many young, growth companies fail, especially if they have trouble raising cash. Many distressed companies fail, because they have trouble making debt payments.

Base year 1 2 3Revenue growth rate 3.00% 3.00% 3.00%Revenues $ 83,680.00 $ 86,190.40 $ 88,776.11 $ 91,439.40 EBIT (Operating) margin 15.99% 15.99% 15.99% 15.99%EBIT (Operating income) $ 13,378.19 $ 13,780.63 $ 14,195.17 $ 14,622.19 Tax rate 27.10% 27.10% 27.10% 27.10%EBIT(1-t) $ 9,752.70 $ 10,046.08 $ 10,348.28 $ 10,659.58 - Reinvestment $ 2,681.31 $ 2,761.75 $ 2,844.60 FCFF $ 7,364.77 $ 7,586.53 $ 7,814.97 NOL $ - $ - $ - $ -

Cost of capital 9.28% 9.28% 9.28%Cumulated discount factor 0.9151 0.8373 0.7662PV(FCFF) $ 6,739.17 $ 6,352.40 $ 5,987.83

Terminal cash flow $ 9,580.81 Terminal cost of capital 6.10%Terminal value $ 212,906.89 PV(Terminal value) $ 95,724.30 PV (CF over next 10 years $ 53,119.25 Sum of PV $ 148,843.55 Probability of failure = 0.00%Proceeds if firm fails = $74,421.78Value of operating assets = $ 148,843.55 - Debt $ 31,400.47 - Minority interests $ 596.00 + Cash $ 4,436.00 + Non-operating assets $ - Value of equity $ 121,283.08 - Value of options $6,379.59 Value of equity in common $ 114,903.49 Number of shares 2,754.28 Estimated value /share $ 41.72 Price $ 68.91 Price as % of value 165.18%

Implied variablesSales to capital ratio 0.94 0.94 0.94Invested capital $ 89,377 $ 92,058 $ 94,820 $ 97,665 ROIC 10.91% 10.91% 10.91% 10.91%

4 5 6 7 8 93.00% 3.00% 2.72% 2.44% 2.16% 1.88%

$ 94,182.58 $ 97,008.05 $ 99,646.67 $ 102,078.05 $ 104,282.94 $ 106,243.46 15.99% 15.99% 15.99% 16.00% 16.00% 16.00%

$ 15,062.05 $ 15,515.14 $ 15,938.41 $ 16,328.61 $ 16,682.63 $ 16,997.61 27.10% 27.10% 28.68% 30.26% 31.84% 33.42%

$ 10,980.23 $ 11,310.54 $ 11,367.28 $ 11,387.57 $ 11,370.88 $ 11,317.01 $ 2,929.94 $ 3,017.84 $ 2,818.26 $ 2,596.91 $ 2,355.00 $ 2,093.99 $ 8,050.29 $ 8,292.70 $ 8,549.02 $ 8,790.66 $ 9,015.88 $ 9,223.01 $ - $ - $ - $ - $ - $ -

9.28% 9.28% 8.65% 8.01% 7.37% 6.74%0.7011 0.6416 0.5905 0.5467 0.5092 0.4770

$ 5,644.18 $ 5,320.25 $ 5,048.20 $ 4,805.94 $ 4,590.60 $ 4,399.68

0.94 0.94 0.94 0.94 0.94 0.94 $ 100,595 $ 103,612 $ 106,431 $ 109,028 $ 111,383 $ 113,477

10.92% 10.92% 10.68% 10.44% 10.21% 9.97%

10 Terminal year1.60% 1.60%

$ 107,943.35 $ 109,670.45 16.00% 16.00%

$ 17,270.94 $ 17,547.27 $ 4,169.08 35.00% 35.00%

$ 11,226.11 $ 11,405.73 $ 1,815.63 $ 1,824.92 $ 27,740.14 $ 9,410.48 $ 9,580.81 $ - $ -

6.10% 6.10%0.4496

$ 4,231.01

After year 100.94

$ 115,292 9.74% 10.00%

Check these revenues againsta. Overall market sizeb. Largest companies in this market

Compare this return on capital in year 10 againsta. the industry average(column E of worksheet)b. the return on capital after year 10If it is too high (low), you may want to lower (raise) your sales to capital ratio

This is how much capital you invested over the ten year period.

This is is how much your operating income grew over the ten-year period.

Valuing Options or WarrantsEnter the current stock price = $ 68.91 Enter the strike price on the option = $ 53.83 Enter the expiration of the option = 5.00Enter the standard deviation in stock prices = 20.00% (volatility)Enter the annualized dividend yield on stock = 0.00%Enter the treasury bond rate = 1.60%Enter the number of warrants (options) outstan 353.09Enter the number of shares outstanding = 2,754.28

Do not input any numbers below this lineVALUING WARRANTS WHEN THERE IS DILUTIONStock Price= 68.91 # Warrants issued= 353.09Strike Price= 53.83 # Shares outstanding= 2,754Adjusted S = 63.132808796 T.Bond rate= 1.60%Adjusted K = 53.83 Variance= 0.0400Expiration (in years) = 5 Annualized dividend yield= 0.00%

Div. Adj. interest rate= 1.60%

d1 = 0.758943052N (d1) = 0.7760566881

d2 = 0.3117294565N (d2) = 0.6223769302

Value per option = $ 18.07 Value of all options outstanding = $6,379.59

VALUATION DIAGNOSTICSInvested capital at start of valuationInvested capital at end of valuationChange in invested capital over 10 yearsChange in EBIT*(1–t) (after-tax operating income) over 10 yearsMarginal ROIC over 10 yearsROIC at end of valuationAverage WACC over the 10 years (compounded)Your calculated value as a percent of current price

Inputs

Revenue growth rate (input cell B3)

Last period EBIT as % of revenue (Input cell B14)

Sales to Capital Ratio or reinvestment (Input cell B15)Return on capital in perpetuity (B30 & B31)

$ 89,377.00 $ 115,292.22 $ 25,915.22 $ 3,892.74

15.02%9.74%8.32%

60.54%

If calculated value is negative or looks too low

Increase revenue growth rate

Increase the target pre-tax operating margin

Decrease the sales/capital ratioIncrease relative to your cost of capital

If calculated value looks too high

Decrease revenue growth rate

Decrease the target pre-tax operating margin

Increase the sales/capital ratio If higher than your cost of capital, lower towards your cost of capital T

Operating Lease ConverterThe yellow cells are input cells. Please enter them.

InputsOperating lease expense in current year = $ 289.00 Operating Lease Commitments (From footnote to financials)

Year Commitment ! Year 1 is next year, ….1 $ 289.00 2 $ 263.00 3 $ 235.00 4 $ 223.00 5 $ 170.00

6 and beyond $ 637.00

OutputPre-tax Cost of Debt = 2.75% ! If you do not have a cost of debt, use the synthetic rating estimator

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 $ 289.00 $ 281.27 2 $ 263.00 $ 249.11 3 $ 235.00 $ 216.63 4 $ 223.00 $ 200.07 5 $ 170.00 $ 148.44

6 and beyond $ 212.33 $ 526.95 ! Commitment beyond year 6 converted into an annuity for ten yearsDebt Value of leases = $ 1,622.47

Restated FinancialsDepreciation on Operating Lease Asset = $ 202.81 ! I use straight line depreciationAdjustment to Operating Earnings = $86.19 ! Add this amount to pre-tax operating incomeAdjustment to Total Debt outstanding = $ 1,622.47 ! Add this amount to debt

Operating Lease ConverterThe yellow cells are input cells. Please enter them.

! If you do not have a cost of debt, use the synthetic rating estimator

! I use the average lease expense over the first five yearsto estimate the number of years of expenses in yr 6

! Commitment beyond year 6 converted into an annuity for ten years

! I use straight line depreciation! Add this amount to pre-tax operating income! Add this amount to debt

Estimation of Current Cost of CapitalInputsEquity 10K: Page #Number of Shares outstanding = 2754.28Current Market Price per share = $ 68.91

Unlevered beta = 1.03 36-43Riskfree Rate = 1.60%Equity Risk Premium = 7.80% 6

DebtBook Value of Straight Debt = $ 29,778.00 Interest Expense on Debt = 769 66Average Maturity = 3.41 82-85Pre-tax Cost of Debt = 2.85% 48Tax Rate = 35%

Book Value of Convertible Debt = 0Interest Expense on Convertible = 0Maturity of Convertible Bond = 0Market Value of Convertible = 0

Debt value of operating leases = $ 1,622.47

Preferred StockNumber of Preferred Shares = 0Current Market Price per Share= 70Annual Dividend per Share = 5

OutputEstimating Market Value of Straight Debt = $ 29,522.55 Estimated Value of Straight Debt in Convertible = $ - Value of Debt in Operating leases = $ 1,622.47 Estimated Value of Equity in Convertible = $ - Levered Beta for equity = 1.14

Equity Debt Preferred Stock CapitalMarket Value $ 189,797.09 $ 31,145.02 $ - $ 220,942.11 Weight in Cost of Capital 85.90% 14.10% 0.00% 100.00%Cost of Component 10.50% 1.85% 7.14% 9.28%

B7

Aswath Damodaran: Use a sector average beta, if need be.

B9

Aswath Damodaran: If your company has risk exposure in emergiing markets, incorporate that risk premiums here. See worksheet on country risk premiums.

B13

Aswath Damodaran: Interest expense (gross) from most recent financial statement.

B14

Aswath Damodaran: Generally found in footnotes to financial statements.

B15

Aswath Damodaran: Current, long term cost of borrowing money. If you have a rating use it, if not use a synthetic rating.

Weighted maturityYear Dollar debt due Weight

0 $8,698.00 29.21% 0.001 $4,083.00 13.71% 0.142 $3,013.00 10.12% 0.203 $4,082.00 13.71% 0.414 $2,404.00 8.07% 0.325 $1,093.00 3.67% 0.18

10 $6,405.00 21.51% 2.15Total 29778 3.41

If you are a multinational company and have a breakdown by country, you can use this table (for up to 10 countries)Country Revenues ERP Weight Weighted ERPBolivia 800 10.88% 80.00% 8.70%Ecuador 200 18.75% 20.00% 3.75%

0.00% 0.00%0.00% 0.00%0.00% 0.00%0.00% 0.00%0.00% 0.00%0.00% 0.00%0.00% 0.00%0.00% 0.00%

Total 1000 100.00% 12.45%If you are a multinational company and have a breakdown only by region, you can use this table insteadRegion Revenues ERP Weight Weighted ERPAfrica 0 9.72% 0.00% 0.0000%Australia & New Zealand 0 6.00% 0.00% 0.0000%Caribbean 10.52% 0.00% 0.0000%Central and South America 10 10.85% 10.00% 1.0854%Eastern Europe & Russia 14 9.94% 14.00% 1.3922%Middle East 8.03% 0.00% 0.0000%North America 39 6.00% 39.00% 2.3400%Western Europe 19 7.64% 19.00% 1.4508%Asia (w/o Japan) 10 9.69% 10.00% 0.9694%Japan 8 7.05% 8.00% 0.5640%Total 100 100.00% 7.8018%

If you are a multi-business company, you can input the followingBusiness Revenues EV/Sales Estimated Valu Unlevered BetaHousehold Products $ 43,747.00 2.2053 $ 96,476.94 0.9550Toiletries/Cosmetics $ 28,657.00 1.4837 $ 42,517.34 1.1960Med Supp Non-Invasive $ 12,421.00 0.7345 $ 9,123.08 1.0670

0.0000 $ - 0.00000.0000 $ - 0.00000.0000 $ - 0.00000.0000 $ - 0.00000.0000 $ - 0.00000.0000 $ - 0.00000.0000 $ - 0.00000.0000 $ - 0.00000.0000 $ - 0.0000

Company $ 84,825.00 $ 148,117.36 1.0311

If you are a multinational company and have a breakdown by country, you can use this table (for up to 10 countries)

If you are a multinational company and have a breakdown only by region, you can use this table instead

Inputs for synthetic rating estimationPlease read the special cases worksheet (see below) before you use this spreadsheet.Before you use this spreadsheet, make sure that the iteration box (under calculation options in excel) is checked.Enter the type of firm = 2 (Enter 1 if large manufacturing firm, 2 if smaller or riskier firm, 3 if financial sDo you have any operating lease or rental commitments? YesEnter current Earnings before interest and taxes (EBIT) = $ 13,292.00 (Add back only long term interest expense for financial firms)Enter current interest expenses = 769 (Use only long term interest expense for financial firms)Enter long term risk free rate = 1.60%OutputInterest coverage ratio = 16.44Estimated Bond Rating = AAA Note: If you get REF! All over the place, set the operating lease commitment question in cell F5Estimated Default Spread = 0.65% to No, and then reset it to Yes. It should work.Estimated Cost of Debt = 2.25%

If you want to update the spreads listed below, please visit http://www.bondsonline.comFor large manufacturing firms For financial service firms (default spreads are slighty different)

If interest coverage ratio is If long term interest coverage ratio is> ≤ to Rating is Spread is greater than ≤ to

-100000 0.199999 D 12.00% -100000 0.0499990.2 0.649999 C 10.50% 0.05 0.099999

0.65 0.799999 CC 9.50% 0.1 0.1999990.8 1.249999 CCC 8.75% 0.2 0.299999

1.25 1.499999 B- 6.75% 0.3 0.3999991.5 1.749999 B 6.00% 0.4 0.499999

1.75 1.999999 B+ 5.50% 0.5 0.5999992 2.2499999 BB 4.75% 0.6 0.749999

2.25 2.49999 BB+ 3.75% 0.75 0.8999992.5 2.999999 BBB 2.50% 0.9 1.1999993 4.249999 A- 1.65% 1.2 1.49999

4.25 5.499999 A 1.40% 1.5 1.999995.5 6.499999 A+ 1.30% 2 2.499996.5 8.499999 AA 1.15% 2.5 2.99999

8.50 100000 AAA 0.65% 3 100000

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

-100000 0.499999 D 12.00%0.5 0.799999 C 10.50%0.8 1.249999 CC 9.50%

1.25 1.499999 CCC 8.75%1.5 1.999999 B- 6.75%2 2.499999 B 6.00%

2.5 2.999999 B+ 5.50%3 3.499999 BB 4.75%

3.5 3.9999999 BB+ 3.75%4 4.499999 BBB 2.50%

4.5 5.999999 A- 1.65%6 7.499999 A 1.40%

7.5 9.499999 A+ 1.30%9.5 12.499999 AA 1.15%

12.5 100000 AAA 0.65%

F5

Aswath Damodaran: If yes, fill in the attached worksheet on operating leases

F6

Aswath Damodaran: If your most recent year's operating income is unusually low or high, you can use the average operating income from the last few years.

F7

Aswath Damodaran: Enter the interest expense from the most recent income statement.

F8

Aswath Damodaran: I use a 10 year government bond rate.

Please read the special cases worksheet (see below) before you use this spreadsheet.Before you use this spreadsheet, make sure that the iteration box (under calculation options in excel) is checked.

(Enter 1 if large manufacturing firm, 2 if smaller or riskier firm, 3 if financial s Small: <$5 billion

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

Note: If you get REF! All over the place, set the operating lease commitment question in cell F5to No, and then reset it to Yes. It should work.

For financial service firms (default spreads are slighty different)If long term interest coverage ratio is

Rating is Spread isD 12.00%C 10.50%

CC 9.50%CCC 8.75%

B- 6.75%B 6.00%

B+ 5.50%BB 4.75%

BB+ 3.75%BBB 2.50%A- 1.65%A 1.40%

A+ 1.30%AA 1.15%

AAA 0.65%

Industry Name Number of firmsAnnual Average Revenue growth - Last 5 yearsAdvertising 31 16.76%Aerospace/Defense 64 9.41%Air Transport 36 8.77%Apparel 57 5.83%Auto Parts 51 23.94%Automotive 12 1.66%Bank 426 0.00%Bank (Midwest) 45 0.00%Beverage 34 -0.59%Biotechnology 158 26.94%Building Materials 45 2.82%Cable TV 21 1.53%Chemical (Basic) 16 33.40%Chemical (Diversified) 31 9.21%Chemical (Specialty) 70 25.69%Coal 20 16.91%Computer Software 184 14.88%Computers/Peripherals 87 10.93%Diversified Co. 107 17.24%Drug 279 34.97%E-Commerce 57 21.87%Educational Services 34 17.27%Electric Util. (Central) 21 4.81%Electric Utility (East) 21 -3.29%Electric Utility (West) 14 1.24%Electrical Equipment 68 25.14%Electronics 139 12.50%Engineering & Const 25 4.58%Entertainment 77 10.49%Entertainment Tech 40 14.78%Environmental 82 9.90%Financial Svcs. (Div.) 225 14.51%Food Processing 112 9.48%Foreign Electronics 9 17.51%Funeral Services 6 1.09%Furn/Home Furnishing 35 1.89%Healthcare Informatio 25 11.71%Heavy Truck & Equip 21 7.38%Homebuilding 23 -9.29%Hotel/Gaming 51 7.52%Household Products 26 16.13%Human Resources 23 0.01%Industrial Services 137 8.39%Information Services 27 16.56%Insurance (Life) 30 0.00%Insurance (Prop/Cas.) 49 17.00%Internet 186 12.44%IT Services 60 7.21%Machinery 100 13.57%Maritime 52 5.93%Med Supp Invasive 83 6.53%Med Supp Non-Invasiv 146 7.18%

Medical Services 122 4.92%Metal Fabricating 24 10.76%Metals & Mining (Div.) 73 31.59%Natural Gas (Div.) 29 8.90%Natural Gas Utility 22 -0.95%Newspaper 13 -5.01%Office Equip/Supplies 24 10.81%Oil/Gas Distribution 13 12.65%Oilfield Svcs/Equip. 93 17.02%Packaging & Container 26 9.09%Paper/Forest Products 32 10.88%Petroleum (Integrated) 20 20.81%Petroleum (Producing) 176 32.22%Pharmacy Services 19 11.95%Pipeline MLPs 27 22.83%Power 93 43.06%Precious Metals 84 32.31%Precision Instrument 77 23.36%Property Management 31 19.80%Public/Private Equity 11 39.94%Publishing 24 -6.93%R.E.I.T. 5 0.01%Railroad 12 12.29%Recreation 56 6.56%Reinsurance 13 0.00%Restaurant 63 2.45%Retail (Hardlines) 75 3.83%Retail (Softlines) 47 6.18%Retail Automotive 20 11.09%Retail Building Supply 8 15.38%Retail Store 37 8.85%Retail/Wholesale Food 30 8.23%Securities Brokerage 28 4.59%Semiconductor 141 41.30%Semiconductor Equip 12 55.88%Shoe 19 3.50%Steel 32 30.89%Telecom. Equipment 99 4.18%Telecom. Services 74 14.95%Telecom. Utility 25 -6.90%Thrift 148 0.00%Tobacco 11 6.61%Toiletries/Cosmetics 15 2.56%Trucking 36 9.52%Utility (Foreign) 4 4.92%Water Utility 11 5.43%Wireless Networking 57 10.71%Total Market 5891 14.80%

Pre-tax Operating Margin After-tax ROC Average effective tax rate Unlevered Beta10.27% 10.54% 10.73% 1.7510.16% 18.53% 20.72% 1.038.78% 16.45% 20.54% 1.1010.97% 14.02% 16.08% 1.226.49% 15.82% 18.99% 1.596.99% 6.96% 24.07% 0.96

NA NA 15.97% 0.38NA NA 17.77% 0.73

20.45% 12.95% 19.14% 0.77-7.79% -13.33% 2.49% 1.164.17% 2.58% 11.17% 0.8919.58% 8.80% 27.35% 0.9812.09% 13.66% 20.90% 1.2413.20% 13.81% 21.73% 1.3911.10% 12.25% 17.58% 1.1515.94% 15.26% 12.75% 1.3231.35% 45.06% 12.27% 1.1814.15% 32.09% 11.77% 1.3314.09% 8.01% 15.55% 0.7121.91% 15.02% 5.36% 1.0814.39% 13.08% 12.33% 1.0820.80% 34.34% 25.17% 0.9217.72% 6.38% 31.82% 0.4819.13% 6.89% 33.14% 0.4916.79% 6.11% 31.30% 0.4913.19% 15.03% 17.02% 1.355.99% 15.72% 10.36% 1.084.72% 13.58% 26.26% 1.3917.72% 9.45% 15.38% 1.3110.48% 11.69% 11.59% 1.4815.22% 7.56% 11.71% 0.6043.49% 5.95% 19.18% 0.509.08% 11.88% 20.00% 0.775.27% 7.83% 35.12% 1.2415.64% 7.81% 30.84% 0.856.43% 9.50% 20.43% 1.6512.11% 9.45% 22.19% 1.209.13% 10.88% 20.62% 1.48-1.56% -2.09% 5.12% 1.0212.61% 6.95% 14.53% 1.2817.38% 14.52% 25.12% 0.951.91% 7.67% 25.35% 1.40

-21.40% -53.50% 19.03% 0.8119.33% 10.83% 18.93% 0.89

NA NA 28.04% 1.54NA NA 19.36% 1.01

18.25% 32.75% 6.87% 1.2414.43% 26.95% 19.15% 1.1411.05% 12.60% 22.15% 1.1414.81% 4.76% 5.55% 0.5822.22% 15.88% 11.86% 0.806.48% 19.24% 12.73% 1.07

11.11% 18.55% 19.93% 0.7815.07% 14.78% 26.55% 1.6331.57% 19.48% 11.04% 1.2828.94% 7.10% 21.98% 1.0612.80% 8.09% 30.16% 0.4614.59% 11.05% 25.13% 1.426.65% 10.36% 21.05% 1.0418.45% 6.83% 13.70% 0.6515.11% 8.54% 17.39% 1.3910.12% 10.40% 24.23% 0.8812.01% 11.01% 10.61% 0.969.76% 10.08% 27.41% 1.1225.74% 13.50% 11.14% 1.135.11% 11.18% 24.67% 1.008.95% 8.60% 6.37% 0.7214.54% 7.56% 8.66% 0.6533.30% 9.57% 7.51% 1.1410.74% 12.10% 13.94% 1.3315.63% 5.18% 18.59% 0.59-2.58% -0.14% 3.79% 1.6212.10% 11.38% 18.55% 0.89

129.07% 14.07% 1.04% 1.1528.43% 11.10% 23.74% 1.2411.51% 8.26% 17.37% 1.11

NA NA 7.22% 1.0515.82% 20.32% 21.57% 1.197.50% 14.99% 23.04% 1.659.39% 28.74% 24.64% 1.576.88% 9.89% 34.43% 1.128.13% 12.18% 31.39% 0.975.84% 13.60% 25.02% 1.143.18% 10.38% 31.21% 0.6448.78% 10.39% 26.22% 0.4322.76% 28.41% 11.01% 1.6921.65% 40.44% 15.17% 2.4211.34% 27.41% 24.31% 1.385.83% 5.94% 21.03% 1.4010.87% 23.30% 13.16% 1.2822.74% 13.70% 14.22% 0.8215.83% 8.34% 29.42% 0.54

NA NA 12.43% 0.7520.61% 27.98% 31.03% 0.7810.85% 19.54% 20.30% 1.206.37% 9.07% 25.48% 1.0811.60% 4.56% 26.07% 0.4826.61% 5.42% 35.22% 0.43-11.47% -18.21% 12.12% 1.1217.24% 12.21% 15.48% 0.92

Equity (Levered) Beta Cost of equityStd deviation in stock pricesPre-tax cost of debt Market Debt/Capital2.02 14.09% 101.29% 5.87% 30.20%1.10 8.49% 61.32% 3.37% 20.42%1.21 9.21% 64.80% 3.37% 19.56%1.30 9.71% 88.82% 4.37% 15.53%1.70 12.13% 80.58% 4.37% 21.66%1.59 11.47% 68.91% 3.87% 57.37%0.77 6.52% 61.15% 3.37% 60.95%0.93 7.50% 55.60% 3.37% 37.31%0.88 7.20% 66.05% 3.87% 20.96%1.03 8.09% 113.11% 5.87% 11.88%1.50 10.96% 78.82% 3.87% 48.54%1.37 10.15% 50.77% 3.37% 40.50%1.36 10.08% 49.27% 2.87% 21.47%1.51 11.02% 56.31% 3.37% 18.28%1.28 9.57% 71.60% 3.87% 17.46%1.53 11.08% 55.52% 3.37% 22.42%1.04 8.17% 82.03% 4.37% 6.97%1.30 9.71% 97.69% 4.87% 9.28%1.14 8.76% 75.00% 3.87% 50.55%1.12 8.63% 103.44% 5.87% 13.39%1.03 8.08% 88.13% 4.37% 6.02%0.83 6.91% 78.24% 3.87% 10.97%0.75 6.41% 23.37% 2.37% 46.28%0.70 6.08% 18.30% 2.37% 39.82%0.75 6.40% 19.85% 2.37% 45.81%1.33 9.89% 67.76% 3.87% 11.24%1.07 8.31% 89.93% 4.37% 18.25%1.22 9.26% 65.03% 3.87% 10.71%1.63 11.72% 108.37% 5.87% 29.07%1.23 9.32% 76.91% 3.87% 8.89%0.81 6.73% 92.14% 4.87% 30.41%1.31 9.76% 82.27% 4.37% 71.55%0.91 7.39% 60.68% 3.37% 22.80%1.09 8.47% 35.40% 2.87% 29.62%1.14 8.73% 39.35% 2.87% 36.14%1.81 12.81% 80.90% 4.37% 19.61%1.17 8.95% 65.79% 3.87% 5.97%1.80 12.76% 69.92% 3.87% 30.39%1.45 10.62% 70.00% 3.87% 50.07%1.74 12.37% 79.09% 3.87% 34.24%1.07 8.32% 62.24% 3.37% 15.96%1.24 9.34% 78.27% 3.87% 9.35%0.93 7.51% 74.43% 3.87% 24.65%1.07 8.35% 48.10% 2.87% 23.20%1.58 11.43% 53.35% 3.37% 39.08%0.91 7.37% 37.88% 2.87% 19.10%1.09 8.45% 117.09% 5.87% 2.63%1.06 8.25% 69.45% 3.87% 5.74%1.20 9.12% 57.21% 3.37% 16.05%1.40 10.30% 69.19% 3.87% 63.01%0.85 6.99% 79.18% 3.87% 13.85%1.03 8.09% 84.89% 4.37% 11.52%

0.91 7.39% 76.26% 3.87% 33.09%1.59 11.48% 68.98% 3.87% 13.41%1.33 9.89% 104.38% 5.87% 12.36%1.33 9.87% 48.77% 2.87% 27.04%0.66 5.85% 24.90% 2.37% 40.26%1.76 12.53% 90.74% 4.87% 31.67%1.38 10.18% 64.26% 3.37% 38.66%0.96 7.68% 56.61% 3.37% 36.83%1.55 11.24% 62.37% 3.37% 18.64%1.16 8.86% 41.59% 2.87% 34.13%1.36 10.08% 93.84% 4.87% 37.45%1.18 9.01% 38.99% 2.87% 16.10%1.34 9.97% 88.11% 4.37% 19.92%1.12 8.63% 59.43% 3.37% 17.00%0.98 7.81% 34.90% 2.87% 29.06%1.35 10.03% 97.19% 4.87% 59.81%1.15 8.79% 90.87% 4.87% 7.57%1.28 9.57% 65.33% 3.87% 13.75%1.13 8.72% 82.21% 4.37% 58.44%2.18 15.01% 77.54% 3.87% 37.45%1.25 9.40% 64.98% 3.37% 38.76%1.47 10.73% 49.61% 2.87% 25.77%1.44 10.56% 42.95% 2.87% 20.09%1.45 10.62% 70.55% 3.87% 32.75%0.93 7.47% 30.40% 2.87% 19.06%1.27 9.52% 68.37% 3.87% 11.32%1.77 12.57% 92.79% 4.87% 19.57%1.44 10.55% 60.90% 3.37% 5.32%1.37 10.13% 52.02% 3.37% 27.59%1.04 8.18% 37.61% 2.87% 12.33%1.29 9.64% 67.71% 3.87% 20.37%0.75 6.39% 40.02% 2.87% 29.25%1.20 9.11% 44.31% 2.87% 81.15%1.50 10.94% 70.52% 3.87% 7.70%1.79 12.70% 68.70% 3.87% 13.20%1.25 9.43% 55.52% 3.37% 2.13%1.68 12.03% 56.94% 3.37% 31.69%1.02 8.00% 87.77% 4.37% 11.48%0.98 7.78% 68.58% 3.87% 25.42%0.88 7.16% 60.39% 3.37% 49.02%0.71 6.17% 53.93% 3.37% 22.68%0.85 7.03% 41.53% 2.87% 15.76%1.30 9.73% 60.34% 3.37% 17.11%1.24 9.38% 59.88% 3.37% 21.73%0.96 7.68% 32.68% 2.87% 60.79%0.66 5.85% 18.89% 2.37% 44.88%1.27 9.54% 75.03% 3.87% 21.30%1.15 8.81% 75.08% 3.87% 31.81%

Cost of capital Sales/Capital EV/Sales EV/EBITDA EV/EBIT Price/Book Trailing PE10.90% 1.42 1.14 7.90 11.09 1.83 27.397.17% 2.53 0.93 7.41 9.14 2.75 34.407.80% 2.40 1.78 12.91 20.22 8.24 156.148.61% 1.85 1.19 8.65 10.83 2.46 20.56

10.07% 3.18 0.59 6.19 9.05 2.08 15.836.22% 1.41 0.73 5.81 10.40 1.05 10.843.78% NA NA 4.37 4.37 0.85 16.695.46% NA NA 4.57 4.57 1.29 34.136.18% 0.83 3.03 12.04 14.80 3.61 22.517.55% 0.97 4.49 NA NA 3.19 18.876.77% 0.82 1.22 10.99 29.23 0.99 265.156.86% 0.71 2.21 6.25 11.27 2.31 12.668.29% 1.43 1.52 8.90 12.60 2.64 12.179.37% 1.48 1.62 8.95 12.28 2.96 12.948.31% 1.56 1.56 9.84 14.06 3.08 15.639.05% 1.22 1.78 7.34 11.14 2.77 12.097.79% 1.83 3.07 8.64 9.81 3.74 68.569.08% 2.96 1.39 8.11 9.85 3.94 38.665.50% 0.68 2.11 11.37 14.99 2.12 17.947.95% 0.89 2.85 9.35 13.02 2.73 25.457.75% 1.20 4.55 22.08 31.60 4.55 192.916.41% 2.66 1.14 4.62 5.47 2.69 13.834.10% 0.55 2.26 7.88 12.76 1.57 16.464.23% 0.54 2.51 8.56 13.14 1.78 20.614.12% 0.54 2.19 7.56 13.03 1.36 15.549.04% 1.51 1.54 9.12 11.68 2.33 24.107.28% 3.51 0.47 5.82 7.84 1.65 14.198.51% 4.05 0.46 7.36 9.76 1.73 15.959.34% 0.78 1.89 8.03 10.67 1.71 15.428.70% 1.29 1.87 11.63 17.81 1.97 23.935.57% 0.80 2.07 8.77 13.58 2.22 30.214.65% 0.18 6.67 14.36 15.33 1.79 21.146.16% 1.82 1.08 9.54 11.93 2.58 20.146.47% 2.43 0.37 3.48 7.03 0.90 16.666.20% 0.79 1.86 9.13 11.86 1.93 13.98

10.81% 2.08 0.92 9.68 14.31 2.19 21.088.55% 1.24 3.82 20.77 31.55 4.55 59.719.59% 1.64 1.34 10.54 14.65 3.42 22.636.47% 1.00 1.23 NA NA 1.38 33.278.93% 0.69 2.58 12.46 20.51 2.64 45.847.32% 1.13 2.21 10.72 12.69 3.33 17.578.68% 6.48 0.29 9.98 14.92 1.71 57.026.23% 2.26 0.85 NA NA 2.40 22.056.81% 0.72 2.94 10.55 15.23 2.97 25.567.76% NA NA 1.32 1.32 0.70 18.616.29% NA NA 95.56 96.01 1.00 35.028.32% 2.25 3.91 17.06 21.41 4.59 36.167.91% 2.61 1.75 9.75 12.15 3.73 21.187.98% 1.53 1.37 9.08 12.41 2.33 21.515.27% 0.35 2.69 9.63 18.14 0.85 31.346.35% 0.92 2.52 9.06 11.36 2.58 43.847.46% 4.00 0.73 9.23 11.34 2.82 37.04

5.71% 2.51 0.68 5.16 6.15 2.09 16.4710.25% 1.36 1.67 8.91 11.06 2.30 18.019.10% 0.89 2.47 6.35 7.83 2.35 31.327.67% 0.41 3.37 6.27 11.63 1.55 54.764.07% 0.94 1.45 8.06 11.36 1.81 15.869.49% 1.23 1.31 6.50 8.99 2.04 40.897.02% 2.26 0.55 5.71 8.25 1.38 16.855.60% 0.47 3.56 12.59 19.28 2.73 43.309.52% 0.76 2.38 9.87 15.78 2.06 27.586.42% 1.48 1.06 7.18 10.51 2.09 13.147.40% 1.12 1.06 5.46 8.83 1.30 26.247.83% 1.78 0.87 5.89 8.87 1.64 58.878.51% 0.71 2.20 5.58 8.53 1.76 38.347.51% 3.56 0.53 8.20 10.28 2.19 12.976.04% 0.99 1.97 15.03 21.96 3.12 27.555.78% 0.69 1.48 6.63 10.17 1.06 17.928.35% 0.40 5.33 11.52 16.00 2.15 90.398.58% 1.38 1.64 10.25 15.30 2.20 32.865.16% 0.40 2.85 13.00 18.21 1.36 48.20

10.26% 0.30 3.43 NA NA 1.02 8.926.54% 1.37 1.15 6.44 9.47 2.20 104.198.41% 0.11 14.13 9.54 10.95 1.89 16.988.79% 0.60 3.44 9.19 12.09 2.67 37.967.90% 0.89 1.60 9.11 13.92 1.71 40.216.37% NA NA 22.47 22.47 0.71 47.478.71% 1.82 2.50 12.17 15.82 6.66 20.03

10.68% 3.00 0.83 7.73 11.06 3.04 36.5210.10% 4.94 0.87 6.84 9.30 3.46 45.457.90% 2.22 0.92 10.76 13.40 3.21 16.227.38% 2.37 1.04 9.74 12.85 3.02 22.788.15% 3.55 0.59 7.45 10.10 2.62 18.785.02% 5.02 0.35 6.73 10.91 2.23 36.663.11% 0.29 3.08 5.97 6.32 0.72 24.77

10.27% 1.57 2.06 6.19 9.03 2.62 20.9011.33% 2.21 0.97 3.78 4.50 1.68 10.839.27% 3.33 1.52 11.64 13.41 3.74 14.108.86% 1.21 0.78 7.08 13.30 0.92 16.467.38% 2.73 1.25 8.46 11.50 2.32 18.326.39% 0.83 1.85 4.80 8.14 1.75 16.974.64% 0.74 1.75 5.33 11.05 1.79 132.355.23% NA NA 3.67 3.67 0.94 36.406.19% 1.84 2.36 10.36 11.44 8.63 14.888.41% 2.70 1.48 11.05 13.67 6.49 35.507.78% 2.16 1.28 10.13 20.05 4.49 30.784.06% 0.58 1.39 5.47 11.95 0.64 1687.023.86% 0.30 4.39 11.13 16.48 1.77 22.358.00% 1.14 1.91 NA NA 2.72 38.686.75% 0.97 1.67 7.37 9.70 2.00 33.67

Yes/No Book or Market ValueYes BNo V

Tax rateAfghanistan 20.00%Albania 10.00%Angola 35.00%Argentina 35.00%Armenia 20.00%Aruba 28.00%Australia 30.00%Austria 25.00%Bahamas 0.00%Bahrain 0.00%Bangladesh 27.50%Barbados 25.00%Belarus 24.00%Belgium 33.99%Bermuda 0.00%Bolivia 25.00%Bosnia and Herzegovin 10.00%Botswana 22.00%Brazil 34.00%Bulgaria 10.00%Cambodia 20.00%Canada 28.00%Cayman Islands 0.00%Chile 20.00%China 25.00%Colombia 33.00%Costa Rica 30.00%Croatia 20.00%Curacao 34.50%Cyprus 10.00%Czech Republic 19.00%Denmark 25.00%Dominican Republic 29.00%Ecuador 24.00%Egypt 20.00%Estonia 21.00%Fiji 28.00%Finland 26.00%France 33.33%Germany 29.37%Gibraltar 10.00%Greece 20.00%Guatemala 31.00%Guernsey 0.00%Honduras 35.00%Hong Kong 16.50%Hungary 19.00%Iceland 20.00%India 32.44%Indonesia 25.00%Ireland 12.50%Isle of Man 0.00%

Israel 24.00%Italy 31.40%Jamaica 33.33%Japan 40.69%Jersey 0.00%Jordan 14.00%Kazakhstan 20.00%Korea, Republic of 22.00%Kuwait 15.00%Latvia 15.00%Libya 20.00%Liechtenstein 12.50%Lithuania 15.00%Luxembourg 28.80%Macau 12.00%Macedonia 10.00%Malaysia 25.00%Malta 35.00%Mauritius 15.00%Mexico 30.00%Montenegro 9.00%Mozambique 32.00%Namibia 34.00%Netherlands 25.00%Netherlands Antilles 0.00%New Zealand 28.00%Nigeria 30.00%Norway 28.00%Oman 12.00%Pakistan 35.00%Panama 25.00%Papua New Guinea 30.00%Paraguay 10.00%Peru 30.00%Philippines 30.00%Poland 19.00%Portugal 25.00%Qatar 10.00%Romania 16.00%Russia 20.00%Saba 0.00%Samoa 27.00%Saudi Arabia 20.00%Serbia 10.00%Singapore 17.00%Slovak Republic 19.00%Slovenia 20.00%South Africa 34.55%Spain 30.00%Sri Lanka 28.00%St Eustatius 0.00%St Maarten 34.50%Sudan 35.00%

Sweden 26.30%Switzerland 21.17%Syria 28.00%Taiwan 17.00%Tanzania 30.00%Thailand 30.00%Trinidad and Tobago 0.00%Tunisia 30.00%Turkey 20.00%Ukraine 25.00%United Arab Emirates 55.00%United Kingdom 26.00%United States 40.00%Uruguay 25.00%Vanuatu 0.00%Venezuela 34.00%Vietnam 25.00%Yemen 20.00%Zambia 35.00%Zimbabwe 25.75%

Country Long-Term RatingAdj. Default SpreadAlbania B1 4.00%Angola Ba3 3.25%Argentina B3 6.00%Armenia Ba2 2.75%Australia Aaa 0.00%Austria [1] Aaa 0.00%Azerbaijan Baa3 2.00%Bahamas A3 1.15%Bahrain Baa1 1.50%Bangladesh Ba3 3.25%Barbados Baa3 2.00%Belarus B3 6.00%Belgium [1] Aa3 0.70%Belize Ca 2.00%Bermuda Aa2 0.50%Bolivia Ba3 3.25%Bosnia and Herzegovina B3 6.00%Botswana A2 1.00%Brazil Baa2 1.75%Bulgaria Baa2 1.75%Cambodia B2 5.00%Canada Aaa 0.00%Cayman Islands Aa3 0.70%Chile Aa3 0.70%China Aa3 0.70%Colombia Baa3 2.00%Costa Rica Baa3 2.00%Croatia Baa3 2.00%Cuba Caa1 7.00%Cyprus [1] Ba3 3.25%Czech Republic A1 0.85%Denmark Aaa 0.00%Dominican Republic B1 4.00%Ecuador Caa2 8.50%Egypt B2 5.00%El Salvador Ba2 2.75%Estonia A1 0.85%Fiji Islands B1 4.00%Finland [1] Aaa 0.00%France [1] Aaa 0.00%Georgia Ba3 3.25%Germany [1] Aaa 0.00%Greece [1] Caa1 7.00%Guatemala Ba1 2.40%Honduras B2 5.00%

Hong Kong Aa1 0.25%Hungary Ba1 2.40%Iceland Baa3 2.00%India Baa3 2.00%Indonesia Baa3 2.00%Ireland [1] Ba1 2.40%Isle of Man Aaa 0.00%Israel A1 0.85%Italy [1] A3 1.15%Jamaica B3 6.00%Japan Aa3 0.70%Jordan Ba2 2.75%Kazakhstan Baa2 1.75%Korea A1 0.85%Kuwait Aa2 0.50%Latvia Baa3 2.00%Lebanon B1 4.00%Lithuania Baa1 1.50%Luxembourg [1] Aaa 0.00%Macao Aa3 0.70%Malaysia A3 1.15%Malta [1] A3 1.15%Mauritius Baa1 1.50%Mexico Baa1 1.50%Moldova B3 6.00%Mongolia B1 4.00%Montenegro Ba3 3.25%Morocco Ba1 2.40%Namibia Baa3 2.00%Netherlands [1] Aaa 0.00%New Zealand Aaa 0.00%Nicaragua B3 6.00%Norway Aaa 0.00%Oman A1 0.85%Pakistan B3 6.00%Panama Baa3 2.00%Papua New Guinea B1 4.00%Paraguay B1 4.00%Peru Baa3 2.00%Philippines Ba2 2.75%Poland A2 1.00%Portugal [1] Ba3 3.25%Qatar Aa2 0.50%Romania Baa3 2.00%Russia Baa1 1.50%Saudi Arabia Aa3 0.70%

Senegal B1 4.00%Singapore Aaa 0.00%Slovakia A2 1.00%Slovenia [1] A2 1.00%South Africa A3 1.15%Spain Baa3 2.00%Sri Lanka B1 4.00%St. Vincent & the Grena B1 4.00%Suriname Ba3 3.25%Sweden Aaa 0.00%Switzerland Aaa 0.00%Taiwan Aa3 0.70%Thailand Baa1 1.50%Trinidad and Tobago Baa1 1.50%Tunisia Baa3 2.00%Turkey Ba1 2.40%Ukraine B2 5.00%United Arab Emirates Aa2 0.50%United Kingdom Aaa 0.00%United States of Americ Aaa 0.00%Uruguay Ba1 2.40%Venezuela B1 4.00%Vietnam B1 4.00%

ValuesRow Labels Count of Country Average of Total Equity Risk PremiAfrica 9 9.72%Australia & New Zealand 2 6.00%Caribbean 10 10.52%Central and South Americ 18 10.85%Eastern Europe & Russia 22 9.94%Middle East 9 8.03%North America 2 6.00%Western Europe 21 7.64%Asia (w/o Japan) 20 9.69%Japan 1 7.05%Grand Total 114 9.34%

Total Equity Risk Premium Country Risk Premium Region12.00% 6.00% Eastern Europe & Russia10.88% 4.88% Africa15.00% 9.00% Central and South America10.13% 4.13% Eastern Europe & Russia

6.00% 0.00% Australia & New Zealand6.00% 0.00% Western Europe9.00% 3.00% Eastern Europe & Russia7.73% 1.73% Caribbean8.25% 2.25% Middle East

10.88% 4.88% Asia (w/o Japan)9.00% 3.00% Caribbean

15.00% 9.00% Eastern Europe & Russia7.05% 1.05% Western Europe9.00% 3.00% Central and South America6.75% 0.75% Caribbean

10.88% 4.88% Central and South America15.00% 9.00% Eastern Europe & Russia

7.50% 1.50% Africa8.63% 2.63% Central and South America8.63% 2.63% Eastern Europe & Russia

13.50% 7.50% Asia (w/o Japan)6.00% 0.00% North America7.05% 1.05% Caribbean7.05% 1.05% Central and South America7.05% 1.05% Asia (w/o Japan)9.00% 3.00% Central and South America9.00% 3.00% Central and South America9.00% 3.00% Eastern Europe & Russia

16.50% 10.50% Caribbean10.88% 4.88% Western Europe

7.27% 1.28% Eastern Europe & Russia6.00% 0.00% Western Europe

12.00% 6.00% Caribbean18.75% 12.75% Central and South America13.50% 7.50% Africa10.13% 4.13% Central and South America

7.27% 1.28% Eastern Europe & Russia12.00% 6.00% Asia (w/o Japan)

6.00% 0.00% Western Europe6.00% 0.00% Western Europe


16.50% 10.50% Western Europe9.60% 3.60% Central and South America

13.50% 7.50% Central and South America

6.38% 0.38% Asia (w/o Japan)9.60% 3.60% Eastern Europe & Russia9.00% 3.00% Western Europe9.00% 3.00% Asia (w/o Japan)9.00% 3.00% Asia (w/o Japan)9.60% 3.60% Western Europe6.00% 0.00% Western Europe7.27% 1.28% Middle East7.73% 1.73% Western Europe

15.00% 9.00% Caribbean7.05% 1.05% Japan

10.13% 4.13% Middle East8.63% 2.63% Eastern Europe & Russia7.27% 1.28% Asia (w/o Japan)6.75% 0.75% Middle East9.00% 3.00% Eastern Europe & Russia

12.00% 6.00% Middle East8.25% 2.25% Eastern Europe & Russia6.00% 0.00% Western Europe7.05% 1.05% Asia (w/o Japan)7.73% 1.73% Asia (w/o Japan)7.73% 1.73% Western Europe8.25% 2.25% Africa8.25% 2.25% Central and South America

15.00% 9.00% Eastern Europe & Russia12.00% 6.00% Asia (w/o Japan)10.88% 4.88% Eastern Europe & Russia

9.60% 3.60% Africa9.00% 3.00% Africa6.00% 0.00% Western Europe6.00% 0.00% Australia & New Zealand

15.00% 9.00% Central and South America6.00% 0.00% Western Europe7.27% 1.28% Middle East

15.00% 9.00% Asia (w/o Japan)9.00% 3.00% Central and South America

12.00% 6.00% Asia (w/o Japan)12.00% 6.00% Central and South America

9.00% 3.00% Central and South America10.13% 4.13% Asia (w/o Japan)


6.75% 0.75% Middle East9.00% 3.00% Eastern Europe & Russia8.25% 2.25% Eastern Europe & Russia7.05% 1.05% Middle East

12.00% 6.00% Africa6.00% 0.00% Asia (w/o Japan)7.50% 1.50% Eastern Europe & Russia7.50% 1.50% Eastern Europe & Russia7.73% 1.73% Africa9.00% 3.00% Western Europe

12.00% 6.00% Asia (w/o Japan)12.00% 6.00% Caribbean10.88% 4.88% Caribbean

6.00% 0.00% Western Europe6.00% 0.00% Western Europe7.05% 1.05% Asia (w/o Japan)8.25% 2.25% Asia (w/o Japan)8.25% 2.25% Caribbean9.00% 3.00% Africa9.60% 3.60% Asia (w/o Japan)

13.50% 7.50% Eastern Europe & Russia6.75% 0.75% Middle East6.00% 0.00% Western Europe6.00% 0.00% North America9.60% 3.60% Central and South America

12.00% 6.00% Central and South America12.00% 6.00% Asia (w/o Japan)

Average of Country Risk Premium3.72%0.00%4.52%4.85%3.94%2.03%0.00%1.64%3.69%1.05%3.34%

my valuation of p&g - nyu stern school of businessadamodar/pdfiles/eqnotes/pg/p&gv… ·...

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