Exhibit A - Kohler Co.

Stock valuation
($ in thousands) -0.06
Actual Projected
Fiscal Year Ended FY1992 FY1993 FY1994 FY1995E FY1996E FY1997E FY1998E
Revenues 2,759,000 3,753,000 4,649,000 5,811,250 7,264,063 9,080,078 11,350,098
Direct Operating Exp (1,296,000) (1,794,000) (2,160,000) (2,673,175) (3,341,469) (4,176,836) (5,221,045)
SG&A (90,000) (119,000) (166,000) (230,740) (320,729) (445,813) (619,680)
EBITDA 1,373,000 1,840,000 2,323,000 2,907,335 3,601,865 4,457,429 5,509,373
Depreciation & Amort. (112,000) (151,000) (237,000) (372,090) (584,181) (917,165) (1,439,948)
EBIT 1,261,000 1,689,000 2,086,000 2,535,245 3,017,684 3,540,265 4,069,425
Taxes (~35%) (333,000) (448,000) (576,000) (684,516) (814,775) (955,871) (1,098,745)
Debt Free Earnings 928,000 1,241,000 1,510,000 1,850,729 2,202,909 2,584,393 2,970,680

Plus: Depreciation & Amort. 112,000 151,000 237,000 372,090 584,181 917,165 1,439,948
Less: CAPEX (317,000) (236,000) (278,000) (348,675) (435,844) (544,805) (681,006)
(Increase) in Working Capital 0 0 0 0 0 0 0
Unlevered Free Cash Flow 723,000 1,156,000 1,469,000 1,874,144 2,351,247 2,956,753 3,729,623

PV of FCF
Discount Factor 7% 1,751,536 2,053,670 2,413,591 2,845,311 9,064,109
Discount Factor 8% 1,735,318 2,015,815 2,347,166 2,741,384 8,839,683
Discount Factor 9% 1,719,398 1,978,997 2,283,156 2,642,159 8,623,710
Exhibit B - Industry Beta Comparison
Company Ticker Debt to Equity Tax Rate Levered Beta Unlevered Beta
msft None 0.2 35% 1.07 1.37
American Standard ASD 0.87 40% 0.82 0.73
American Woodmark AMWD 0.16 40% 0.76 1.09
masco MAS 0.2 40% 1.28 1.78
Briggs & Stratton BGG 0.21 40% 0.66 0.91
Cummins Diesel CUM 0.61 40% 1.09 1.13
Detroit Diesel DDC 0.21 40% 1.30 1.79
Industry Average 0.99 1.26
Relever Industry Average for Kohler 0.2 40% Err:522 Err:522

Bl = Bu x [1 + (1 – tax rate) x (D / E)], or

Bu = Bl / [1 + (1 – tax rate) x (D / E)]
Exhibit C - MSFT. - Cost of Capital

Cost of Equity (Ke)

Risk Free Rate (Rf) 10yr Treasury 04/1998 5.64
Mkt Risk Premium 8.5
Size Premium - 1
Beta 1.07
Ke =5.64% + 1.07(8.5% +1%)
Ke = 15.81%

Cost of Debt (Kd)

Estimated All-In Cost for Company 8.50%
Effective Tax Rate 35%
Kd = 6.5% * (1-40%)
Kd= 6%

Cost of Preferred (Kp)

Balance Sheet does not show any Preferred Stock
Kp= 0%

Equity: $54*581M shares 29,994,000,000 97%

Debt: 913,000,000 3%
Total Value: 30,907,000,000

WACC = Kd (1-T)(D/V) + Ke(E/V)

WACC = 15.4%
Exhibit D - DCF Analysis: Using Perpetuity Growth Rate for Terminal Value (in $ thousands)

Discount Rate 10% 11% 12%

Perpetuity Growth Rate 2% 3% 4% 2% 3% 4% 2% 3% 4%
2001E Unlevered FCF 3,729,623 3,729,623 3,729,623 3,729,623 3,729,623 3,729,623 3,729,623 3,729,623 3,729,623
Terminal Value 47,552,687 54,878,731 64,646,790 42,269,055 48,018,890 55,411,535 38,042,150 42,683,458 48,485,093

PV of Terminal Value 32,479,125 37,482,912 44,154,628 27,843,936 31,631,530 36,501,294 24,176,474 27,126,109 30,813,153
PV of Free Cash Flow 9,064,109 9,064,109 9,064,109 8,839,683 8,839,683 8,839,683 8,623,710 8,623,710 8,623,710
(Add Back)Cash and Cash Equivalents 70,978 70,978 70,978 70,978 70,978 70,978 70,978 70,978 70,978
Implied Value of Enterprise 41,614,212 46,617,999 53,289,715 36,754,597 40,542,192 45,411,956 32,871,162 35,820,797 39,507,841

Average Value 41,381

DCF Analysis: Using EBITDA Multiple for Terminal Value (in $ thousands)

Discount Rate 10% 11% 12%

EBITDA Multiple 5 8 12 5 8 12 5 8 12
2001E EBITDA 5,509,373 5,509,373 5,509,373 5,509,373 5,509,373 5,509,373 1,405,350 1,405,350 1,405,350
Terminal Value 27,546,865 44,074,984 66,112,476 27,546,865 44,074,984 66,112,476 7,026,749 11,242,799 16,864,198

PV of Terminal Value 18,814,879 30,103,807 45,155,711 18,145,973 29,033,557 43,550,336 4,465,626 7,145,002 10,717,503
PV of Free Cash Flow 9,064,109 9,064,109 9,064,109 8,839,683 8,839,683 8,839,683 8,623,710 8,623,710 8,623,710
(Add Back)Cash and Cash Equivalents 70,978 70,978 70,978 70,978 70,978 70,978 70,978 70,978 70,978
Implied Value of Enterprise 27,949,966 39,238,894 54,290,798 27,056,635 37,944,219 52,460,997 13,160,314 15,839,690 19,412,191

Average Value 31,928

DCF Analysis: Using Sales Multiple for Terminal Value (in $ thousands)

Discount Rate 10% 11% 12%

Sales Multiple 1 2 3 1 2 3 1 2 3
2001E Sales 11,350,098 11,350,098 11,350,098 11,350,098 11,350,098 11,350,098 11,350,098 11,350,098 11,350,098
Terminal Value 11,350,098 22,700,195 34,050,293 11,350,098 22,700,195 34,050,293 11,350,098 22,700,195 34,050,293

PV of Terminal Value 7,752,269 15,504,539 23,256,808 7,476,661 14,953,322 22,429,983 7,213,192 14,426,385 21,639,577
PV of Free Cash Flow 9,064,109 9,064,109 9,064,109 8,839,683 8,839,683 8,839,683 8,623,710 8,623,710 8,623,710
(Add Back)Cash and Cash Equivalents 70,978 70,978 70,978 70,978 70,978 70,978 70,978 70,978 70,978
Implied Value of Enterprise 16,887,356 24,639,626 32,391,895 16,387,322 23,863,983 31,340,644 15,907,880 23,121,073 30,334,265

Average Value 23,875