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Discounted Cash Flow (DCF) Valuation Forward Estimates Long Term Forward Estimates Terminal Year
Fiscal Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Number of weeks 52 52 52 53 52 52 52 53 52 52 52 53
In millions

Net Sales $20,087.5 $22,241.4 $24,181.5 $26,478.7 $28,861.8 $31,315.1 $33,820.3 $35,849.5 $38,000.5 $40,280.5 $42,697.3 $45,259.2
% Growth 10.7% 8.7% 9.5% 9.0% 8.5% 8.0% 6.0% 6.0% 6.0% 6.0% 6.0%
EBITDA 1,600.1 1,440.4 1,519.7 1,668.2 1,832.7 2,004.2 2,181.4 2,294.0 2,412.4 2,537.0 2,668.0 2,805.8
% Growth -10.0% 5.5% 9.8% 9.9% 9.4% 8.8% 5.2% 5.2% 5.2% 5.2% 5.2%
% Margin 7.97% 6.48% 6.28% 6.30% 6.35% 6.40% 6.45% 6.40% 6.35% 6.30% 6.25% 6.20%
Operating profit (EBIT) 1,303.5 1,119.6 1,209.4 1,364.3 1,515.3 1,671.7 1,830.8 1,922.3 2,018.4 2,119.3 2,225.3 2,336.6 2,406.7
% Growth -14.1% 8.0% 12.8% 11.1% 10.3% 9.5% 5.0% 5.0% 5.0% 5.0% 5.0% 3.0%
% Margin 6.49% 5.03% 5.00% 5.15% 5.25% 5.34% 5.41% 5.36% 5.31% 5.26% 5.21% 5.16%
Tax rate 40.0% 41.8% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0% 38.0%
NOPAT 782.1 651.9 749.8 845.8 939.5 1,036.4 1,135.1 1,191.8 1,251.4 1,314.0 1,379.7 1,448.7 1,492.1
Depreciation and amortization 296.6 320.8 310.3 303.9 317.4 332.5 350.6 371.7 394.0 417.6 442.7 469.2 469.2
% Growth 8.2% -3.3% -2.1% 4.5% 4.7% 5.5% 6.0% 6.0% 6.0% 6.0% 6.0%
% Margin 1.48% 1.44% 1.28% 1.15% 1.10% 1.06% 1.04% 1.04% 1.04% 1.04% 1.04% 1.04%
Change in WC providing/(requiring) cash (306.2) (322.4) 106.1 (203.2) (209.7) (216.3) (221.5) (221.5) (221.5) (221.5) (221.5) (221.5) (221.5)
Operating Cash Flows 772.5 650.3 1,166.2 946.5 1,047.2 1,152.6 1,264.2 1,342.0 1,423.9 1,510.1 1,600.8 1,696.4 1,739.9
Capex - Additions to PP&E (695.3) (713.6) (1,108.8) (850.0) (850.0) (850.0) (850.0) (850.0) (850.0) (850.0) (850.0) (850.0) (850.0)
Capex/D&A 2.34x 2.22x 3.57x 2.80x 2.68x 2.56x 2.42x 2.29x 2.16x 2.04x 1.92x 1.81x 1.81x
Capex % of sales 3.5% 3.2% 4.6% 3.2% 2.9% 2.7% 2.5% 2.4% 2.2% 2.1% 2.0% 1.9%
Unlevered FCF 77.2 (63.3) 57.4 96.5 197.2 302.6 414.2 492.0 573.9 660.1 750.8 846.4 889.9

Discount Rate (WACC) 9.54% 9.54% 9.54% 9.54% 9.54% 9.54% 9.54% 9.54% 9.54%
Projection Year 1 2 3 4 5 6 7 8 9
Discount Factor 1/((1+WACC)^Projection Year) 0.91 0.83 0.76 0.69 0.63 0.58 0.53 0.48 0.44
Present Value of Free Cash Flows (Unlevered FCF) 88.1 164.4 230.2 287.7 312.0 332.2 348.8 362.2 372.8
Yoy % change in FCF 86.6% 40.1% 25.0% 8.4% 6.5% 5.0% 3.8% 2.9%

Assumptions Calculation of DilutedShares/Options Outstanding Terminal Value

Long term sales growth 6.00% Sum of PV of FCF (8 years) 2,498.3
Operating Leverage in LT Projections (if any) -1.00% WACC 9.5%
Long term growth rate in EBIT 3.00% Current Share Price $27.93 Long term growth rate in EBIT 3.0%
Actual Basic Share Count 393.6 Present value of terminal Value 5,992.4
Discount Rate (WACC) Worksheet Date of Share Count 3/3/2003 Terminal Value as % of Total Value 70.6%
Public Market Price/Share $27.93 Source of share count 2002 10K
Diluted Shares O/S (TS Method) 394.6 Intrinsic ("Fair") Value Calculation
Public Market Capitalization 11,022.4 Options Data Date: 12/28/2002 Source: 2002 10K EV (Equity Value + Net Debt) 8,490.7
Debt 2002A 1,113.1 - Debt 1,113.1
Cash 2002A 700.4 Options Strike In the $? Include? Proceeds + Cash 700.4
Net Debt 2002A 412.7 Batch 1 0.275 $13.10 Yes 0.275 $3.6 Net Debt 412.7
Public Market Enterprise Value 11,435.1 Batch 2 2.784 $18.61 Yes 2.784 $51.8 Equity Value (Market Capitalization) 8,078.0
Batch 3 7.646 $29.83 No 0.000 $0.0 Diluted Shares O/S 394.6
E/(D+E) @ Public Mkt Value 96.39% Batch 4 3.766 $31.92 No 0.000 $0.0
D/(D+E) @ Public Mkt Value 3.61% Batch 5 4.586 $40.63 No 0.000 $0.0 Fair Value Per Share $20.47
Batch 6 4.333 $60.45 No 0.000 $0.0
Avg. Pretax Int.Exp. (Annual.) 2002A 4.61% Total 23.390 3.059 $55.4
Marginal Tax Rate 38.0% Actual avg strike price $18.11

Cost of Equity= rf+beta( Rm-Rf) 9.79% Basic Shares Outstanding 393.6

Risk Free rate: Rf 3.87% Fully Diluted Shares Outstanding 396.6
Unlevered Beta 0.8 Fully Diluted Shares Outstanding (Treasury Stock Method) 394.6
Risk premium (Rm-Rf) 7.40%

WACC=E/(D+E)* Re+ D/(D+E)*Rd(1-T) 9.54%

For Illustrative Purposes Only Copyright 2003 by Wall Street Prep, Inc. All rights reserved.
 Sensitivity Anaysis 1 - Terminal Value Approach - Growth In Perpetuity Method

PV of Terminal Value
at a Perpetual Growth Rate of: Enterpise Value
WACC PV of FCF 2.0% 3.0% 4.0% 2.0% 3.0% 4.0%
From Model 9.54% 2,498.3 5,197.6 5,992.4 7,074.1 7,696.0 8,490.7 9,572.4
8.00% 2,713.8 7,419.1 8,902.9 11,128.7 10,133.0 11,616.8 13,842.5
9.00% 2,571.2 + 5,853.0 6,828.5 8,194.2 = 8,424.2 9,399.8 10,765.5
Sensitivity 10.00% 2,438.4 4,717.3 5,391.2 6,289.7 7,155.7 7,829.6 8,728.1
11.00% 2,314.6 3,865.2 4,348.3 4,969.5 6,179.7 6,662.9 7,284.1
12.00% 2,199.0 3,208.9 3,565.4 4,011.1 5,407.9 5,764.4 6,210.1

Equity Value (EV - Net Debt) Fair Value Per Share

WACC 2.0% 3.0% 4.0% 2.0% 3.0% 4.0%
From Model 9.54% 7,283.3 8,078.0 9,159.7 $18.46 $20.47 $23.21
8.00% 9,720.3 11,204.1 13,429.8 $24.63 $28.39 $34.03
9.00% 8,011.5 8,987.1 10,352.8 = $20.30 $22.77 $26.23
Sensitivity 10.00% 6,743.0 7,416.9 8,315.4 $17.09 $18.79 $21.07
11.00% 5,767.0 6,250.2 6,871.4 $14.61 $15.84 $17.41
12.00% 4,995.2 5,351.7 5,797.4 $12.66 $13.56 $14.69

Sensitivity Anaysis 2 - Terminal Value Approach - EBITDA Exit Multiple Method

PV of Terminal Value as
Multiple of 2011 EBITDA Enterpise Value
WACC PV of FCF 6.0x 7.0x 8.0x 6.0x 7.0x 8.0x
From Model 9.54% 2,498.3 7,414.1 8,649.8 9,885.5 9,912.5 11,148.2 12,383.8
8.00% 2,713.8 8,421.6 9,825.2 11,228.8 11,135.5 12,539.1 13,942.7
9.00% 2,571.2 + 7,751.2 9,043.1 10,335.0 = 10,322.5 11,614.3 12,906.2
Sensitivity 10.00% 2,438.4 7,139.6 8,329.6 9,519.5 9,578.0 10,768.0 11,957.9
11.00% 2,314.6 6,581.2 7,678.0 8,774.9 8,895.7 9,992.6 11,089.5
12.00% 2,199.0 6,070.8 7,082.6 8,094.4 8,269.8 9,281.6 10,293.4

Equity Value (EV - Net Debt) Fair Value Per Share

WACC 6.0x 7.0x 8.0x 6.0x 7.0x 8.0x
From Model 9.54% 9,499.8 10,735.5 11,971.1 $24.07 $27.20 $30.33
8.00% 10,722.8 12,126.4 13,530.0 $27.17 $30.73 $34.28
9.00% 9,909.8 11,201.6 12,493.5 = $25.11 $28.38 $31.66
Sensitivity 10.00% 9,165.3 10,355.3 11,545.2 $23.22 $26.24 $29.25
11.00% 8,483.0 9,579.9 10,676.8 $21.50 $24.27 $27.05
12.00% 7,857.1 8,868.9 9,880.7 $19.91 $22.47 $25.04

For Illustrative Purposes Only Copyright 2003 by Wall Street Prep, Inc. All rights reserved.