Mini Project 2

In this project, you are supposed to be a financial manager working for a big corporation. You will determine the cost of debt, cost of preferred stock, cost of common equity, capital structure, and the weighted average cost of capital (WACC) for a publicly traded company of your choice.

University of Houston-Victoria
FINC 6352- Financial Management
Dr. Xavier Garza Gomez
Mini Project 2

Capital Structure and Cost of Capital

1. Purpose of the project:
In this project, you are supposed to be a financial manager working for a big corporation and you
have to apply the knowledge obtained from the financial management (FINC6352) course. You
will determine the cost of debt, cost of preferred stock, cost of common equity, capital structure,
and the weighted average cost of capital (WACC) for a publicly traded company of your choice.

2. Outline for the project:

(1) Cost of capital components
– Estimate the firm’s before-tax and after-tax component cost of debt;
– Estimate the firm’s component cost of preferred stock;
– Use three approaches (CAPM, DCF, bond-yield-plus-risk-premium) to estimate the
component cost of common equity of the firm. Include your own calculation of the beta
for the company.

(2) Estimate Capital Structure
– Estimate the firm’s weights of debt, preferred stock, and common stock using the firm’s
balance sheet (book value)
– Estimate the firm’s weights of debt, preferred stock, and common stock using the market
value of each capital component
– Calculate the firm’s weighted average cost of capital (WACC) with both structures

3. Other information regarding the project:

(1) Your project should be well-organized and typed in a Word document, but you must
attach the Excel file with your report. The style and organization part of the project account
for 10 percent of the grade.
(2) Information obtained in this MP will be used in other mini projects so any feedback
received on the calculation of WACC must be incorporated for the next Mini project.

This mini project is worth 60 points (out of 1000).

>Compet

1 Home Depot Inc (NYS:

) E

xchange rate used is that of the

Year

End reported date HD
Profitability Ratios 0

1/20

21 02/02/2020 02/03/201

9 01/2

/2018 01/29/201

7 0

1/31/20

6 02/01/201

5 02/02/201

4 02/03/20

13 01/29/20

12 01/30/20

11 01/31/20

10 02/01/2009 02/03/2008 01/28/2007 ROA

% (Net) 2

1.18 2

3.6

7 2

4.72 1

9.7

8 1

8.6

6 17

.04 15

.81 13.2

3 1

0.9

4 9.6

6 8.26 6.5 5.3 8.9

5 1

1.9

4 ROE

% (Net) 14

099.83 AvgEqty<0

AvgEqty<0 29

9.07 149.85 89.89 58.25 3

5.6

4 2

5.01 2

1.17 1

7.4

9 1

4.3

6 12.7

7 2

0.2

3 2

2.2

4 ROI % (Operating) 53

.2 5

7.05 5

4.76 5

2.19 48

.46 43.61 39.05 3

2.93 26.69 2

3.3 2

0.29 1

6.53 1

4.4

8 2

1.01 28.66 EBITDA Margin % 1

5.67 1

6.39 16

27 1

6.59 1

6.28 1

5.4

1 1

4.73 1

3.8

6 12.6

4 1

1.8

5 1

1.11 9.99 8.7

8 1

1.83 12.72 Calculated Tax Rate % 2

4.2

2 23

.6 23.6

37 36.3 3

6.4

36.4 36.4

7.2 3

6.01 36.7 34.2

35.6 36.4

8.11 Revenue per Employee 262427 2658

84 257756 244991 2

633 230551 224810 216516 216309 213258 212411 209331 2

2000 2299

04 250238 Liquidity Ratios 01/31/2021

02/02/2020 02/03/2019 01/28/2018 01/29/2017 01/31/2016 02/01/2015 02/02/2014 02/03/2013 01/29/2012 01/30/2011 01/31/2010 02/01/2009 02/03/2008 01/28/2007

Quick Ratio 0.4

7 0.23 0.22 0.3

4 0.32 0.33 0.28 0.31 0.34

0.34

0.1

0.23

0.13 0.14

0.3
Current Ratio 1.2

3 1.08

1.11 1.17

1.25 1.3

6 1.36 1.4

2 1.34 1.55 1.33

1.34 1.2

1.15 1.39 Net Current Assets % TA 7.52 2.8 4.1

2 6.15 8.36 1

0.5 10.1 11.1

8 9.52

12.7

8.37 8.65 5.37 4.44

9.7
Debt Ma

gement

01/31/2021 02/02/2020 02/03/2019 01/28/2018 01/29/2017 01/31/2016 02/01/2015 02/02/2014 02/03/2013 01/29/2012 01/30/2011 01/31/2010 02/01/2009 02/03/2008 01/28/2007
LT Debt

Equity 1

0.8

6 Equity<0

Equity<0 16.69 5.16 3.31 1.81

1.17

0.53 0.6 0.46 0.45 0.54 0.64 0.47 Total

Debt to Equity 11.29

Equity<0 Equity<0 1

8.5

9 5.45 3.37 1.84

1.18

0.61

0.6

0.52

0.5 0.64

0.7

0.47
Interest Coverage 1

4.0

6 14.05 1

5.94 1

4.9

3 14.35 1

5.64 2

1.24 13.11 14.25 1

1.23 10.32 5.85

5.67

1.64 26.5 Asset Management

01/31/2021 02/02/2020 02/03/2019 01/28/2018 01/29/2017 01/31/2016 02/01/2015 02/02/2014 02/03/2013 01/29/2012 01/30/2011 01/31/2010 02/01/2009 02/03/2008 01/28/2007
Total Asset Turnover 2.17 2.3

2 2.4 2.31 2.22 2.15 2.07 1.94

1.8

1.75 1.68 1.62 1.67 1.58 1.88 Receivables Turnover 5

1.97 5

4.6

54.76

0.83 4

8.41 52.62 5

7.8

8 56.59 55.72 6

0.59 66.55 6

8.55 6

4.08 3

3.9

6 32.42 Inventory Turnover

5.6

5.11 5.33 5.26

5.11

5.09

4.9 4.72

4.65

4.4

4.29

4.2

4.22 4.18 5.04 Accounts Payable

Turnover 1

3.66 14.22 1

4.19 1

4.21 13.99

14.35

14.38 1

4.15

14.38

4.75 1

4.23 1

3.7 1

3.5

5 11.6

3 13.61 Accrued Expenses

Turnover 27.32 2

6.67 26.86 2

7.02 26.58 26.68 2

6.18 25.6 24.8 24.6

2 2

4.11 23.59 24.99 24.63 3

0.09 Property Plant & Equip Turnover 5.58

4.9

4.79

4.6 4.3

3.95 3.62 3.33 3.03 2.85 2.69 2.56 2.66 2.81 3.54 Cash

& Equivalents

Turnover 26.42 56.52 3

9.63

39.91 45.07 4

5.68 35.74 3

2.83 55.76 6

9.3

6 68.41 148.31 145.64 1

30.

78 Per Share

01/31/2021 02/02/2020 02/03/2019 01/28/2018 01/29/2017 01/31/2016 02/01/2015 02/02/2014 02/03/2013 01/29/2012 01/30/2011 01/31/2010 02/01/2009 02/03/2008 01/28/2007
Cash Flow per Share 17.59 12.59 1

1.28 1

0.24 7.98 7.36

6.18 5.37

4.58 4.27 2.79 3.05

3.3 3.05

3.74 Book Value per Share 3.06 – 2.89 -1.7 1.26

3.6 5.04

7.13

9.07

11.98

11.64 11.64

1.42 10.4

10.48

2.71

ratios company

Low

e’s Companies Inc (NYS:

LOW

)
Exchange rate used is that of the Year End reported date

LOW
Profitability Ratios

01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007 ROA % (Net)

13.57 11.61 6.65 9.92 9.27 8.09 8.38 7.01 5.93 5.38 6.04 5.44 6.93 9.61 1

1.87 ROE % (Net)

43.2

7 152.88 48.76 56.17

43.2

28.98

24.8

17.83 12.93 10.44 10.84

9.63

12.89 17.7 2

0.71 ROI % (Operating)

3.48

30.78

8.86 2

9.35 2

7.11 2

3.94 2

1.99 18.36 15.16

13.2

14.62

12.93

16.19 21.98 27.17 EBITDA Margin %

11.26 1

0.69 7.6 1

0.96 11.3 1

0.93 1

1.16 10.5 1

0.06 9.4

7 10.54 1

0.01 1

1.04 12.57 13.45 Calculated Tax Rate % 24.6

3.87 31.8

37.2

40.53 4

2.39 36.9 37.76 37.55 36.72 37.73 36.88 37.39

37.73

7.88 Revenue per Employee

264245 22

82 238350 221960 220571 219394 211945 204442 206775 199177 209184 198116 211190 224147 224076 Liquidity Ratios 01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007
Quick Ratio 0.28 0.06

0.05

0.06 0.05

0.07

0.06 0.06 0.09

0.16

0.16 0.14

0.08

0.07

0.12 Current Ratio

1.19

1.01

0.98 1.06

1 1.01 1.08 1.16

1.27

1.28 1.4

1.32

1.15

1.12

1.27
Net Current Assets % TA

7.69

0.34

-0

.78 1.92

0.08 0.22 2.3

4.34 6.36

6.5

8.45

7.2

3.76

3.03 6.39
Debt Management 01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007
LT Debt to Equity 14.38 8.5 3.95

2.65 2.24 1.51

1.08

0.85 0.65 0.43 0.36

0.24 0.28

0.35

0.28
Total Debt to Equity 15.16

9.79 4.45

2.89

2.44 1.65 1.14 0.89 0.66

0.46 0.36

0.27

0.34

0.41

0.28
Interest Coverage

11.38 9.14 6.44

10.4

9.06 9.01 9.29 8.72 8.42 8.83 10.7

10.84

13.52 24.25 33.45 Asset Management 01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007
Total Asset Turnover

2.08 1.96 2.05

1.97

1.95

1.88 1.75 1.64

1.53 1.47

1.47

1.44 1.52

1.65

1.79 Receivables Turnover – – – – – – – – – – – – – –

5228.44 Inventory Turnover

4.09 3.82 4.04 4.14

4.27 4.19

4.07

3.94

3.92

3.94 3.82 3.74

4.01 4.28

4.44
Accounts Payable Turnover 9.69 9.08 9.62 10.39 10.41 11.01 1

1.13 11.08 11.25 11.35 11.33 11.28 12.3

7 13.38 14.81 Accrued Expenses Turnover 50.07 52.37 53.48 50.3 46.34 44.72 44.58 45.76

58.7

3 78.7 9

3.67 11

2.73 121.65 118.23 Property Plant & Equip Turnover 4.75 3.9

3.75 3.47 3.24 2.99 2.76 2.53 2.33

2.24 2.2

2.09

2.19 2.4 2.66
Cash & Equivalents Turnover 33.2

4 117

.92 130.13 120.08 132.85 136.02 1

31.57 114.94 65.16 59.3 76.2

4 107.98 18

3.89 150.13 119.58 Per Share 01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007
Cash Flow per Share 14.81

5.54 7.66 6.05

6.28

5.17

5 3.89

3.28

3.37 2.76

2.78 2.84 2.94

2.94
Book Value per Share 1.97

2.58 4.55 7.08 7.43

8.41

10.38 11.51 1

2.48 13.32

13.38

13.07 1

2.28 11.04 10.31

Compet2

)

Exchange rate used is that of the Year End reported date

WMT
Profitability Ratios 01/31/2021 01/31/2020

01/31/2016

01/31/2014

01/31/2010

ROA % (Net)

6.53

8.55

8.09 7.8

ROE % (Net)

ROI % (Operating)

EBITDA Margin %

6.4 4.72

7.49

7.86

7.46

Calculated Tax Rate %

32.2

34.2

Revenue per Employee

Liquidity Ratios 01/31/2021 01/31/2020 01/31/2019 01/31/2018 01/31/2017 01/31/2016 01/31/2015 01/31/2014 01/31/2013 01/31/2012 01/31/2011 01/31/2010 01/31/2009 01/31/2008 01/31/2007
Quick Ratio

0.2 0.18 0.16

0.22 0.24 0.2 0.2 0.2

0.22 0.2 0.16 0.2

Current Ratio

0.8 0.76

0.93 0.97

0.83 0.88 0.89

0.88

0.9

Net Current Assets % TA

Debt Management 01/31/2021 01/31/2020 01/31/2019 01/31/2018 01/31/2017 01/31/2016 01/31/2015 01/31/2014 01/31/2013 01/31/2012 01/31/2011 01/31/2010 01/31/2009 01/31/2008 01/31/2007
LT Debt to Equity

0.64 0.69 0.47 0.54

0.54 0.58 0.54 0.66 0.64 0.51 0.53 0.52 0.5

Total Debt to Equity 0.6

0.8 0.6 0.59

0.62

0.71

0.73 0.58 0.65 0.69

Interest Coverage

10.31

12.3

12.71 12

Asset Management 01/31/2021 01/31/2020 01/31/2019 01/31/2018 01/31/2017 01/31/2016 01/31/2015 01/31/2014 01/31/2013 01/31/2012 01/31/2011 01/31/2010 01/31/2009 01/31/2008 01/31/2007
Total Asset Turnover 2.28 2.3

2.48 2.43 2.39

2.39 2.4 2.44

2.41

Receivables Turnover

Inventory Turnover 9.4 8.9

8.6 8.26

8.11

8.7 9.08 9

Accounts Payable Turnover 11.6

11.04

12.13

13.66

Accrued Expenses Turnover

23.2

23.53

Property Plant & Equip Turnover

5 4.85 4.65 4.45 4.3 4.23 4.15 4.19

4.24

4.23 4.32

Cash & Equivalents Turnover

Per Share 01/31/2021 01/31/2020 01/31/2019 01/31/2018 01/31/2017 01/31/2016 01/31/2015 01/31/2014 01/31/2013 01/31/2012 01/31/2011 01/31/2010 01/31/2009 01/31/2008 01/31/2007
Cash Flow per Share 12.71 8.86

8.54

7.11

7.01

5.01

Book Value per Share

23.59

Walmart Inc (NYS:							WMT
				01/31/2019					01/31/2018					01/31/2017					01/31/2015					01/31/2013					01/31/2012	01/31/2011	01/31/2009	01/31/2008	01/31/2007
	5.51		3.15	4.89	6.83		7.29	8.01		7.86	8.39	9.33		8.58	8.17
	17.32	20.22	8.87	12.67	17.19	18.15	20.76	2	2.96	22.45		23.53	21.08	2		0.58	2					0.18	19.67
	17.37	15.84	17.23	16.48	1		7.85	18.38	2	0.51	20.41	2			1.73	2				1.85	2	2.16	21.82	20.98	20.96		21.2
	6.07	5.56	6.74	6.95		7.46	7.72						7.75	7.63	7.27	7.47
	33.35	24.43	37.36	3				0.42	30.27	30.31		32.2	32.87	31.01	32.56	32.35	34.19	33.56
	242445	238165	233820	217540	210672	219150	220750	216497	212673	203159	200880	194388	192618	180380	183500
	0.26					0.19				0.21
		0.97	0.79	0.86			0.88					0.87	0.81
	-1.02	-6.76	-7.1	-9.22	-4.65	-2.19	-0.98	-3.99	-5.85	-3.79	-3.65	–		4.24	-3.94	-6.65	-3.42
		0.56	0.55
	0.73						0.62	0.74	0.75	0.63
	10.28	8.53	9.38	1	0.04	9.77	1		1.56		1			2.13	13.47	12.75	12.23	13.41
	2.43	2.38	2.34			2.36	2.47		2.41
	87.13	83.39	86.48	87.4	8	4.57	77.75	72.19	70.85	73.65	8			1.07	91.38	10										1.43	107.02	116.66	126.74
	8.75	8.06	8.08	8.34	8.79	8.32	8.02
11.14	11.43	12.54	12.81		12.62	12.53	12.74	1	3.18	13.77	12.96	13.04
2								5.49	25.41	2	4.85	23.64		23.2		23.9	2	4.32	23.36	23.42	21.66	20.99	22.72	23.1
		5.65	4.16	4.12	4.33
	40.99	60.97	71.06	73.46	62.23	54.05	59.17	63.24	65.3	64.1	5		5.14	5	3.78	62.99	5	8.54	50.58
9.48	9.46		10.14	8.84	7.56	6.47	6.79	5.86	4.84
2	8.69	26.37	25.19	26.38	25.52	25.47	25.21	23.04	20.86		19.4	18.69	16.63	16.26	14.91

Compet3

Exchange rate used is that of the Year End reported date

Profitability Ratios

ROA % (Net)
ROE % (Net)
ROI % (Operating)
EBITDA Margin %
Calculated Tax Rate %
Revenue per Employee
Liquidity Ratios
Quick Ratio
Current Ratio
Net Current Assets % TA
Debt Management
LT Debt to Equity
Total Debt to Equity
Interest Coverage
Asset Management
Total Asset Turnover
Receivables Turnover
Inventory Turnover
Accounts Payable Turnover
Accrued Expenses Turnover
Property Plant & Equip Turnover
Cash & Equivalents Turnover
Per Share
Cash Flow per Share
Book Value per Share

12/29/2019

12/30/2018

12/31/2017

01/01/2017

01/03/2016

12/28/2014

12/29/2013

12/30/2012

01/01/2012

01/02/2011

01/03/2010

12/28/2008

12/30/2007

12/31/2006

01/01/2006

asreported

Exchange rate used is that of the Year End reported date

01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007

USD USD USD USD USD USD USD USD USD USD USD USD USD USD

Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified

Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands

, net

– – – – – –

– – – – – – – – – – –

– – – –

– – – – – – – – – – –

506000

–

– – – – – – – – – – – – –

200000

1008000

222000

– – – – – – – – –

will

–

303000

– – – – – – – – – –

702000

–

722000

43000 –

– – – –

23000

294000

49000 47000

36000 552000 34000 40000 88000

541000

– – – – – – – – – – – – –

372000

577000

– –

– – – – – – – – – – – –

000

340000

222000

– – – – –

Self-insurance liabilities

501000 378000

318000 – – – – –

return reserve

252000

194000 – – – – – – – – – – – –

256000

184000

104000

– – – – –

144000 194000 179000

153000

– – – – –

168000 – – – – – – – – – – – – – –

104000

109000 108000 111000 124000

112000 102000 – – – – –

826000 832000

932000

664000 655000 – – – – –

Other current liabilities

000

0000

– – – – –

Other current liabilities – – – – – – – – – –

5000 5000 6000 6000 7000 7000 16000 17000 19000 20000 17000 35000 27000 33000 30000

500000 499000

– – – – – – – – – – – 694000 694000 694000

– – – – – – – – – – –

232000

27000

– – – – – – – – – – –

– – – – – – – – – – – – –

– – – – – – – – – – – – – –

891000

501000 431000

– – – –

– – – – – – – – – – – 343000 347000

597000

294000 795000 1061000 552000 49000 47000 592000 36000 552000 34000 40000 88000

– – – – – – – – – – – – –

Deferred income taxes – net – – – – – – 97000 291000

531000

670000 735000

827000

730000 730000

– – – –

712000

000

869000

774000

366000

455000

729000 735000 729000

90000 – – 22000 – – – – 26000 14000 11000 6000 277000 16000 102000

-136000

11000

52000 46000 53000 27000

8000 1000

000

Report Date 01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007
Currency USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Scale Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands

of sales

– – – – – – – – – – – 49000 102000

– – – – –

expenses

1477000

– – – – – – – – – –

668000

582000

431000 418000 341000

247000

32000 – – – – – – – – – – – – – –

13000 – – – – – – – – – – 2000 11000 – –

– 30000 58000 56000 53000 42000 42000 40000 37000 38000 35000 32000 31000 32000 34000

24000 27000 28000 16000 12000 4000 6000 4000 9000 12000 12000 17000 40000 45000 52000

– 1000 3000 5000 4000 3000 2000 4000 4000 10000 14000 19000 36000 65000 32000

– – 3000

2000

-1000 6000

8000 7000

– – –

20000 21000 12000 19000 23000 13000 13000 7000 8000 6000 4000 5000 22000 25000 21000

– –

– – – – – – – – – – –

– – – – –

1688000

1162000 891000

425000 268000

252000

221000

155000 124000

166000

1545000

1359000

121000

60000 6000

-133000 50000

82000 -1000

18000

3000 -4000 -6000

-6000 2000 -24000

1000 5000

56000 9000

52000

75000 – -6000

1342000

2042000

1873000 1578000

1702000

24000 13000 7000 11000 11000 12000 16000 16000 14000 15000 17000 13000 – – –

– – – – 18000 – – – – – – – – – –

1824000

– – –

811000 839000

927000 988000

1462000

1061000

1510000

731000 763000 801000

910000

5.49 2.84 4.09 3.48 2.73 2.71

1.43 1.42

1.51 1.9

7.75 5.49 2.84 4.09 3.47 2.73 2.71 2.14 1.69 1.43 1.42 1.21

1.99

2.3 2.13 1.85 1.58 1.33 1.07 0.87 0.7 0.62 0.53 0.42

0.29 0.18

220000 200000 190000 200000 190000

161000 161000 166000

160000 157000

120000 120000 110000 110000

90000 91000 95000 85000 87000 73000 73000 65000 56000 53000

78000 94000

251000 154000

– – – – – – – – –

1727000 3452000 5425000 6241000 7593000

11355000 13224000 15852000 17371000 18307000 17049000 15345000 14860000

–

33000 – – – – – – – – – –

–

1169000 991000 858000

708000

491000

276000

4721000

2686000

3000 –

160000

Retained earnings (accumulated deficit)

1727000 3452000 5425000 6241000 7593000 9591000 11355000 13224000 15852000 17371000 18307000 17049000 15345000 14860000

2010000 1783000 2195000 2809000 3105000

Depreciation & amortization

1586000

1464000 1237000

– – – – – – – – – – – – –

Deferred income taxes -108000 177000

53000 28000

54000 -133000

69000 2000 -6000

– – – – – – – – – – – – – 51000 23000

139000 117000

40000

33000 25000 64000 83000

103000 193000 89000 – –

will

– –

– – – – – – – – – – – –

1060000 – – 464000 – – – – – – – – – – –

– – – – – 591000 57000 52000 48000 – – – – – –

– 12000 9000

– – – – – – – – – –

– – – – – – – – – – – – 8000 – –

exchange rate changes

– – – – – – – – – – – – 3000 – –

d payment expense

155000 98000 74000 99000 90000 117000 119000 100000 100000 107000 115000 102000 95000 99000 62000

Merchandise inventory – net

-28000

-464000

250000

83000

137000

7000 31000 -64000

Accounts payable

653000 524000 127000 291000 303000 -5000 60000 175000

Deferred revenue

– – – – – – – – – – – – – –

437000 137000 79000 70000 188000

117000

219000

174000

33000

s from operating activities

– – – – – – – – – – –

– – – –

1393000

884000

– – – –

– – – – – – – – – – – 624000 431000

572000

– – – – – – – – – – –

1162000 415000

– – – – – – – – – –

-7000

– – – – – – – – –

– – – – – –

– – – – –

90000

76000 45000 37000 57000 52000 75000

52000 25000 18000 29000 57000 72000

– – – –

– – – – – – – – – –

– – – – 179000 – – – – – – – – – –

– – – -509000

– –

– – – – – – –

-25000 –

13000

-28000 -4000 5000 4000

– – – – –

220000 – – – – – – – – – – – – –

– –

466000 43000

386000 – – –

23000

–

993000

10000 15000

-552000

-552000 -37000

-33000

152000 118000 114000 139000 139000 125000 137000 165000 349000 100000 104000 75000 76000 80000 76000

– – – – – – – – – – – 53000 98000 69000 100000

Repurchases of common stock

-8000

– – – – – – – – – – 1000 – 1000 6000 12000

-1000 -5000

55000 24000

22000 -21000 – – – – –

10000 1000

13000 -11000 -9000 -5000 -6000 1000 -1000 3000 20000 7000 – –

, including cash classified within current assets held for sale

193000

– – – – – – – – – – – –

Net increase (decrease) in cash & cash equivalents 3974000 205000

30000 153000

75000

362000 20000 387000

-59000

– 12000

– – – – – – – – – – – –

511000 588000 558000

466000 391000 541000

281000 364000 423000

716000 511000 588000 558000 405000 466000 391000 541000 1014000 652000 632000 245000 281000 364000

824000 671000 635000 654000 619000 535000 504000

444000 361000 319000 314000 309000 198000 179000

1588000

1590000

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			Lowe’s Companies Inc (NYS: LOW)
As Reported Annual Balance Sheet
										Report		Date
									Currency																																																																																												USD
										Audit Status																																																																																														Not Qualified
									Consolidated																																																																																												Yes
									Scale																																																																																												Thousands
Cash & cash equivalents	46							900	71									6000		5		1																																																								100	5	8	8000	5	58000	40	5000		466000	3	91000	541000	10	1	400	6	52000	6	32000	2	45000	2	81000	3	64000
Short-term investments			506000							16000		2			18000								102000					10000	30								7000		1			25000	1	85000			125000		286000		471000			425000		416000	2				49000		432000
	Merchandise inventory – net	16	19								3000	13		1	79000			12561000	1			1393000			10458000			9458000	89					11000	91					27000	8		60000	83		55000	83		21000	8	249000		8	209000			7611000	7	144000
	Deferred income taxes						23000				252000	2				17000		1		83000			193000		208000						166000	2			47000								161000
Other current assets	9		37000		1263000	9	38000	6		89000				884000						391000	3		48000			341000		301000	2			34000					33000		218000	2		15000	2		98000	2								13000
Total current assets	223		26000	15	318000	142		28000	127	72000	1							20000		10561000			1008000		10296000		9784000		10072000		9967000		9732000	9	2	51000		8686000	83			14000
Land	7315000	7							200000	7196000	7414000	73		29000	7086000	70					40000	7016000	6986000	69				36000	67		42000	65			19000	6144000	5566000	5496000
Buildings	120		69000	11258000	10036000	9	655000
Buildings & building improvements	180				90000	178	62000	18052000	18521000	18147000	17451000	17		247000	17161000	16968000	1	664000	16	5		31000
		Equipment	10466000	10377000	10090000	104					75000	109	78000	10863000	10426000	10063000	97		80000	98		35000	9142000	8	826000	87	97000	8	118000	7477000
Leasehold improvements	3818000	35			76000	3063000	2476000
Construction in progress	831000	525000	5				30000		464000	513000						73000	834000		932000	921000	930000	1036000	1	702000	20						53000
Total cost		36702000		35945000		35863000	3			6	94000		36918000		35913000	354			43000	350		74000	34	666000		34332000		33345000	32	268000	3		1477000		28836000	25			104000
Less: accumulated depreciation		17547000	17	276000	17			431000	17	219000		16969000		16336000		15409000	1	4				24000		13189000	12		362000	11		2				56000		9769000		8755000		7475000		6133000
Property, less accumulated depreciation	19		155000		18669000		18432000		19721000		19949000	19		577000		20034000		20834000		21477000	219	70000		22089000	22	4		99000	22	7				22000	21		361000		18971000
Operating lease right-of-use assets	3	832000	3		891000
Long-term investments				372000	256000		408000					366000		222000	3	54000		279000		271000				504000				277000		253000		509000		1			65000
	Deferred income taxes – net			340000		216000				294000			168000		241000
		Good					303000	1	307000	10	82000
Other assets	882000	9					950		915000		789000		665000			1359000		1323000		1	134000		1013000					635000		497000			46000		313000		317000
Total assets	46				735000					39471000					34508000	35		291000					34408000					31266000	31			827000					32732000					32666000					33559000					33699000					33005000	3	2686000	30		869000				27767000
Short-term borrowings	1941000	1			137000	510000			386000	9	87000	1064000
Current maturities of long-term debt	1	1									12000		597000			111000		795000				1061000						552000			592000
Current operating lease liabilities			501000
	Accounts payable		10884000		7659000		8279000		6590000		6651000		5633000	5		124000		5008000	46			57000		4352000		4351000		4287000	4	109000		3713000	3	524000
Accrued salaries & wages	424000
Accrued compensation & employee benefits	13		50000	684000	662000	747000	790000	820000	773000	785000			670000	613000		667000		434000
	Self-insurance liabilities	751000				671000	650000
	Deferred revenue	1608000	1219000	1299000	1	378000	1253000	1078000	979000	892000				824000						801000	707000	683000		674	717000						731000
Accrued dividends	440000	420000	385000	304000	255000	186000	178000		174000
	435000		347000	327000		343000	346000	324000	316000
		Sales			194000
Sales tax liabilities				153000		184000	210000	140000	131000	122000	158000
Accrued interest		250000		221000			179000		165000	136000	126000
Income taxes payable
Accrued property taxes			120000		108000		121000
		Other current liabilities	1			314000			988000	997000	829000	850000
3	235	2581000	2425000		195	1975000	1857000	1920000	1756000			1510000	1533000
1358000	1256000	1033000	1122000	1151000
Total current liabilities					1873000		15182000		14497000		12096000		11974000		10492000	9	348000	8	876000	7	708000		7891000	7		119000		7355000		8022000		7751000		6539000
Secured mortgage notes
Unsecured debt – notes	21121000	16648000	1	4721000	14961000	14321000	12073000	10860000	9617000	8627000	7189000	6192000		500000	498000
Debentures	693000
Medium-term notes		232000	237000
Senior notes	3276000	3273000	3271000	267000
Convertible notes					511000			198000
Convertible subordinated notes	518000
Finance or capitalized lease obligations				654000			712000			774000	861000	526000		491000		418000					364000
Capital leases & other long-term debt		371000	400000
					Total long-term debt						21780000						17365000						15501000	15	858000					15189000				12606000				11367000				10135000				9077000				7627000			6573000			5080000			5073000			5616000		4413000
Less: current maturities		1112000		1		110000
Long-term debt, excluding current maturities	20	668000		16768000		14391000		15564000		14394000	1	1545000		10815000		10086000		9030000		7035000		6537000		4528000		5039000	5	576000		4325000
Noncurrent operating lease liabilities	3890000	3943000
		455000	467000		598000		660000
Deferred revenue – extended protection plans		1019000		894000		803000							763000							729000	715000	704000	631000
Other liabilities		991000		1149000		955000		843000			846		896000		901000		865000		833000		1455000						910000		443000
Total liabilities	45	298000		37499000		30864000		29418000		27974000		23612000		21859000		20879000		18809000		17026000		15587000		13936000		14631000		14771000	1				2042000
Common stock		381000		401000			415000		433000		480000		515000		555000		621000		677000		762000
Capital in excess of par value
	Retained earnings (accumulated deficit)		1			117000						1727000						3452000						5425000						6241000						7593000			9		591000						11355000						13224000						15852000					17371000					18307000			17049000			15345000		14860000
Accumulated other comprehensive income (loss)				-136000		-209000			-24000		-394000	–	103000			-17000								-6000
Total shareholders’ equity (deficit)	1	437000						1972000						3644000						5873000						6434000						7654000						9968000						11	853						13857000						16533000					18112000				19069000				18055000		16098000		15725000
As Reported Annual Income Statement
Net sales					89597000					72148000	71		309000	68			619000					65017000					59074000					56223000					53417000					50521000					50208000					48815000	47					220000	48	230000				48283000	46		927000
	Cost			60025000	49		205000			48401000			45210000			42553000			38504000			36665000			34941000			33194000			32858000		3	1663000			30757000			31729000			31556000			30729000
Gross margin	29	572000		22943000		22908000		23409000		22464000		20570000	19					558000		18476000		17327000		17350000	17	152000		16463000		16501000		16727000		16198000
Selling, general & administrative expenses		18526000	1	5367000		17413000		15376000		15129000	14	115000		13		281000		12865000		12244000		12593000		12006000	1	1688000		11074000		10515000		9738000
Store opening costs		141000		146000
	Depreciation		1484000		1485000				1462000		1523000		1480000				1586000		1614000		1539000		1366000				1162000
	Depreciation & amortization		1399000		1262000		1447000		1489000
Operating income (loss)				9647000				6314000				4018000				6586000				5846000
Interest expense on long-term debt	807000		582000	583000	505000	470000	312000	293000	292000	183000
Interest expense on lease obligations
Interest expense on short-term borrowings
Interest expense on capitalized lease obligations
Interest income
Interest capitalized
Interest on tax uncertainties	-3000							-1000			-27000			-9000
Other interest expense
Interest – net		-848000			-691000	–	624000		-633000			-645000					-552000			-516000			-476000	–		423000			-371000			-332000			-287000			-28000			-194000	–	154000
Gain (loss) on extinguishment of debt	–	1060000			-464000
Total expenses	16151000	15282000	14803000	14						190000	14		444000	13924000	13638000	12	995000	12216000	1	1200000
Pre-tax earnings (losses)				7739000				5623000				3394000				5489000				5201000				4419000				4276000				3673000				3137000				2906000			3228000			2825000			3506000			4511000			4998000
Current provision (benefit) for income taxes – federal					1578000	935000	963000	1734000			1824000	1475000					1342000	1171000	1046000		107000	1495000	1657000
Current provision (benefit) for income taxes – state	274000	275000	248000	203000		188000	123000	207000	242000
Total current provision (benefit) for income taxes	2003000	1203000			1237000	1986000	2099000	1936000	1696000	1317000		1015000		1169000	1236000				1702000	1899000
Deferred provision (benefit) for income taxes – federal	-73000	-102000			-59000	-112000			-133000	-117000		-108000				-11000
Deferred provision (benefit) for income taxes – state	-26000	-55000				-4000		-25000	-19000			-7000
Total deferred provision (benefit) of deferred income taxes	-99000				139000	–			157000		-63000	-118000	-158000	-139000	-141000	–	127000
Income tax provision (benefit)				1904000				1080000				2108000	1		387000				1178000				1067000			1218000			1042000			1311000			1893000
	Net earnings (loss)								5835000								4281000								2314000								3447000								3093000								2546000							2698000							2286000					1959000	1		839000		2010000			1783000				2195000			2809000			3105000
Less: net earnings allocable to participating securities
Less: Premium paid to acquire noncontrolling interest
Net earnings (loss) allocable to common shares	5		811000		4268000		2307000		3436000		3062000		2534000		2682000		2270000		1945000	1	993000		177000
Weighted average shares outstanding – basic		748000		777000		880000		1059000		1150000		1271000		1401000		1457000		1481000	1		535000
Weighted average shares outstanding – diluted		750000		778000		812000		840000		881000		929000		990000		1152000		1273000		1403000				1464000		1472000		1566000
Year end shares outstanding					830000				866000				960000				1030000			1110000				1241000	1	354000				1459000				1470000				1458000				1524500
Net earnings (loss) per common share – basic				7.77									2.14										1.69									1.21			2.02
Net earnings (loss) per common share – diluted					1.49							1.86
						Cash dividends per share		0.355		0.335
				Number of full time employees			180000				175000				167000								160000			164000
Number of part time employees							100000
Number of common stockholders	21657	22129	22326	22926	23575	24337	25065	25932	27259	28727	29962	31041	31701	31941	31770
Foreign currency translation adjustments	-221000	-291000
As Reported Annual	Retained Earnings
Previous retained earnings (accumulated deficit)			9591000		12191000
Cumulative effect of accounting change	-263000		-8000
Cash dividends declared	1724000	1	653000	1500000	1324000	741000	672000						588000	522000	428000
	Repurchases of common stock	4090000	2820000	2939000	3274000	3553000	3604000	3414000	3879000	2358000	1888000
	1117000
As Reported Annual Cash Flow
					1839000
	1594000		1410000		1607000		1540000			1590000		1587000		1562000		1623000		1579000		1684000		1733000		1667000
Noncash lease expense	479000	468000
-151000	-68000	-124000	-162000		-14000	-123000
Loss (gain) on disposition or writedown (write-back) of fixed & other assets
Loss (gain) on property & other assets – net	630000	143000	456000
Impairment of	good	952000
Loss (gain) on extinguishment of debt
Loss on equity method investments
Loss (gain) on cost method & equity method investments	-82000	302000
Loss on redemption of long-term debt
Transaction loss						from
Share-	base
-2967000	-600000	-1289000	-791000	-178000	-582000	170000	-396000	-244000		-33000		-64000	-611000			-509000
Other operating assets	326000		-376000	-110000	-183000	-34000						-5000	-87000	-142000	-135000
3211000	-637000	1720000	-92000	402000		185000	692000
512000
Other operating liabilities	813000	-654000			319000		215000	212000	265000
	Net cash flow				11049000				4296000				6193000				5065000				5617000				4784000				4929000				4111000				3762000	4	349000				3852000				4054000				4122000				4347000				4502000
Purchases of short-term investments	-344000			-21000	-920000	-284000
Purchases of investments		-3094000		-743000		-1373000		-981000		-1192000	-934000	-820000	-759000	-1444000	–	1433000		-2605000
Proceeds from sale or maturity of investments		2926000		695000	1	114000		1254000		805000		709000		1837000		2120000		1822000
Proceeds from sale or maturity of short-term investments	1183000
Purchases of long-term investments	-1483000	-1148000	–	1588000		-558000
Proceeds from sale or maturity of long-term investments	1160000	994000
Decrease (increase) in other long-term assets	-97000	-62000	-56000			-16000
Property acquired			-1829000			-1329000			-1799000			-3266000			-4010000			-3916000
Capital expenditures			-1791000			-1484000			-1174000	–	1123000			-1167000			-1197000			-880000			-940000			-1211000
Contributions to equity method investments – net	-125000	-241000	-173000	-219000	-232000
Proceeds from sale of property & other long-term assets		163000	130000
Purchases of derivative instruments		-103000
Proceeds from settlement of derivative instruments
Acquisition of business – net		-2356000		-203000
Other investing activities – net	-2000			-13000	-115000
Net cash flows from investing activities		-1894000		-1369000		-1080000		-1441000		-3361000		-1343000		-1088000		-1286000		-903000	–					1437000		-2184000		-1886000		-3226000		-4123000		-3715000
Net change in commercial paper		-941000
Net change in short-term borrowings		-415000		625000		-386000		-1007000		-57000		1041000
Net proceeds from issuance of debt	7929000	3972000	2968000	3267000	1718000	1239000	985000	1984000	1985000	1296000	989000
Repayment of debt	-5618000	-1113000		-326000	-2849000	-1173000	-48000	-47000	-591000		-37000	-573000	-96000
Proceeds from issuance of common stock under share-based payment plans
Proceeds from issuance of common stock from stock options exercised
Cash dividend payments				-1704000				-1618000				-1455000				-1288000				-1121000				-957000			-822000			-733000			-704000			-647000			-571000			-391000			-491000			-428000			-276000
–			4971000	-4313000	-3037000	-3192000	-3595000	-3925000	-3905000	-3710000	-4393000	-2	937000	-2618000	-504000	-2275000	-1737000
Excess tax benefits of share-based payments
Other financing activities – net		-38000		-10000		-75000			-15000
Net cash flows from financing activities		-5191000	–	2735000	–	5124000		-3607000		-2092000		-3493000		-3761000		-2969000		-3333000		-2549000		-1651000		-1801000		-939000		-307000		-846000
Effect of exchange rate changes on cash			-12000
	Net increase (decrease) in cash & cash equivalents			3974000	-23000
	-77000		-61000		-150000		-473000		-36000		-83000
Less: net increase (decrease) in cash classified within current assets held for sale		-54000
Cash & cash equivalents, beginning of year					716000					405000					1014000					652000					632000					245000
Cash & cash equivalents, end of year		4	690000
		Cash paid for interest, net of amount capitalized		454000
Cash paid for income taxes, net	1423000		1316000	1673000	2	217000	2055000	1534000	1505000	1404000	914000	1157000	1138000	1725000	2031000

standardized

Report Date

01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007

Currency USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Scale Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands

Cash & Equivalents

716000 511000 588000 558000 405000 466000 391000 541000 1014000 652000 632000 245000 281000 364000

506000 160000 218000 102000 100000 307000 125000 185000 125000 286000 471000 425000 416000 249000 432000

876000 729000 690000

712000 591000 576000 666000

1123000

– – – – – – 0 0 0 0 0 0 0 0 0

12561000

10458000 9458000

7611000

– – – – – – 230000 252000 217000 183000 193000 208000 166000 247000 161000

937000 1263000

884000 391000 348000 341000 301000

218000 215000 298000

10561000

10296000 9784000 10072000 9967000 9732000

8686000

36702000 35945000 35863000

36918000 35913000

34332000 33345000

28836000

17547000

16969000 16336000 15409000

13189000

9769000 8755000 7475000 6133000

18669000 18432000 19721000 19949000

20034000 20834000 21477000

22089000

18971000

200000 372000 256000 408000 366000 222000 354000 279000 271000 504000 1008000 277000 253000 509000 165000

– 303000 303000

– – – – – – – – – –

340000 216000 294000 168000 222000 241000 – – – – – – – – –

995000 915000 789000 665000 1359000 1323000 1134000 1013000 635000 497000

313000 317000

39471000 34508000

34408000 31266000

32732000 32666000 33559000 33699000 33005000

27767000

5367000

Accounts Payable 10884000 7659000 8279000 6590000 6651000 5633000 5124000 5008000

4352000 4351000 4287000

3713000

Accrued Expenses

1015000 667000 577000 434000 424000 372000

1112000

552000 435000 47000 592000 36000 552000

1104000 111000

2735000

15182000 14497000 12096000 11974000 10492000

7891000

7355000 8022000 7751000 6539000

16768000 14391000 15564000 14394000

10815000 10086000 9030000 7035000 6537000 4528000 5039000

4325000

1019000 894000 827000 803000 763000 729000 827000 1021000

598000 660000 670000 735000

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

1149000 955000 843000 846000 869000 896000 901000 865000 833000 1455000 910000 774000 443000

37499000 30864000 29418000 27974000 23612000 21859000 20879000 18809000 17026000 15587000 13936000 14631000 14771000

366000 381000 401000 415000 433000 455000 480000 515000 555000 621000 677000 729000 735000 729000 762000

90000 – – 22000 – – – – 26000 14000 11000 6000 277000 16000 102000

Retained Earnings 1117000 1727000 3452000 5425000 6241000 7593000 9591000 11355000 13224000 15852000 17371000 18307000 17049000 15345000 14860000

-136000 -136000 -209000 11000

-394000 -103000 -17000 52000 46000 53000 27000 -6000 8000 1000

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

1437000 1972000 3644000 5873000 6434000 7654000 9968000 11853000 13857000 16533000 18112000 19069000 18055000 16098000 15725000

46735000 39471000 34508000 35291000 34408000 31266000 31827000 32732000 32666000 33559000 33699000 33005000 32686000 30869000 27767000

89597000 72148000

65017000 59074000 56223000 53417000 50521000 50208000 48815000

48283000

89597000 72148000 71309000 68619000 65017000 59074000 56223000 53417000 50521000 50208000 48815000 47220000 48230000 48283000 46927000

60025000

48401000 45210000 42553000 38504000 36665000 34941000 33194000 32858000

30757000 31729000 31556000 30729000

22943000 22908000 23409000 22464000 20570000

18476000 17327000 17350000

16463000 16501000 16727000 16198000

18526000

17413000 15376000 15129000

13281000 12865000 12244000 12593000 12006000

11074000 10515000 9738000

1399000 1262000 1477000 1447000 1489000 1484000 1485000 1462000 1523000 1480000 1586000 1614000 1539000 1366000 1162000

0 0 0 0 0 0 0 0 0 0 0 49000 102000 141000 146000

9647000 6314000 4018000 6586000 5846000 4971000

3560000

-848000 -691000

-633000 -645000 -552000 -516000 -476000

-371000 -332000 -287000

-194000

0 0 -464000 0 0 0 0 0 0 0 0 0 0 0

-691000 -624000

-645000 -552000 -516000 -476000 -423000 -371000 -332000 -287000 -280000 -194000 -154000

7739000 5623000 3394000 5489000 5201000 4419000 4276000 3673000 3137000 2906000 3228000 2825000 3506000 4511000 4998000

1904000 1342000 1080000 2042000 2108000 1873000 1578000

1178000 1067000 1218000 1042000 1311000 1702000 1893000

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

5835000 4281000 2314000 3447000 3093000 2546000 2698000 2286000 1959000 1839000 2010000 1783000 2195000 2809000 3105000

-24000 -13000 -7000 -11000

-12000 -16000 -16000 -14000 -15000 -17000 -13000 0 0 0

4268000 2307000 3436000 3062000 2534000 2682000 2270000 1945000 1824000

2195000 2809000 3105000

Shares Basic

748000 777000 811000 839000 880000 927000 988000 1059000 1150000 1271000 1401000 1462000 1457000 1481000

7.77 5.49 2.84 4.09 3.48 2.73 2.71 2.14 1.69 1.43 1.42 1.21 1.51 1.9 2.02

750000 778000 812000 840000 881000 929000 990000 1061000 1152000 1273000 1403000 1464000 1472000 1510000 1566000

7.75 5.49 2.84 4.09 3.47 2.73 2.71 2.14 1.69 1.43 1.42 1.21 1.49 1.86 1.99

731000 763000 801000 830000 866000 910000 960000 1030000 1110000 1241000

1459000 1470000 1458000 1524500

1727000 3452000 5425000 6241000 7593000 9591000 11355000 13224000 15852000 17371000 18307000 17049000 15345000 14860000 12191000

1117000 1727000 3452000 5425000 6241000 7593000 9591000 11355000 13224000 15852000 17371000 18307000 17049000 15345000 14860000

1663000

1616000 1316000

371000

209000 89000 314000 73000 366000 -4000

81000

11049000 4296000 6193000 5065000 5617000 4784000 4929000 4111000 3762000

3852000 4054000 4122000 4347000 4502000

-1791000 -1484000 -1174000

-1167000 -1197000 -880000 -940000 -1211000 -1829000 -1329000 -1799000 -3266000 -4010000 -3916000

-3094000 -743000 -1373000 -981000 -1192000

-2605000

2926000 695000 1393000

1254000 884000 805000 709000 1837000 2120000 1822000

– – – -509000 -2356000 – – -203000 – – – – – – –

65000 163000 74000 58000 100000 29000 48000 80000 134000 -63000

-27000 50000 56000

-1894000 -1369000 -1080000 -1441000 -3361000 -1343000 -1088000 -1286000 -903000

-2184000 -1886000 -3226000 -4123000 -3715000

-941000 220000 -415000 625000 466000 43000 -386000 386000 – – – -1007000 -57000 1041000 23000

-326000 119000

938000 1393000

1433000 -27000 -558000 1200000 956000

-376000 167000

-1704000 -1618000 -1455000 -1288000 -1121000 -957000 -822000 -733000 -704000 -647000 -571000 -391000 -491000 -428000 -276000

-38000 -1000 -5000 -10000 -75000 55000 24000 -15000 22000 -21000 0 0 0 0 0

-5191000

-3607000 -2092000 -3493000 -3761000 -2969000 -3333000 -2549000 -1651000 -1801000 -939000 -307000 -846000

10000 1000 -12000 13000 -11000 -9000 -5000 -6000 1000 -1000 3000 20000 7000 – –

– 12000 -54000 – – – – – – – – – – – –

3974000 205000 -77000 30000 153000 -61000 75000 -150000 -473000 362000 20000 387000 -36000 -83000 -59000

ing Cash

716000 511000 588000 558000 405000 466000 391000 541000 1014000 652000 632000 245000 281000 364000 423000

4690000 716000 511000 588000 558000 405000 466000 391000 541000 1014000 652000 632000 245000 281000 364000

1594000 1410000 1607000 1540000 1590000 1587000 1586000 1562000 1623000 1579000 1684000 1733000 1667000 1464000 1237000

-1791000 -1484000 -1174000 -1123000 -1167000 -1197000 -880000 -940000 -1211000 -1829000 -1329000 -1799000 -3266000 -4010000 -3916000

– – – – – – 0 0 0 0 0 0 0 0 0

– – – – – –

0.852

–

– – – – – – – – – –

0.852

– – – – – – – – –

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

2.706

0.965

1.455

– –

– – – –

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

2.737

0 0 0 0 0 0 0 0 0 0 0

8.415

7.767

0 0

0 0 0 0 0 0 0 0 0 0 0

-0.958 -0.875

-0.992 -0.934 -0.918 -0.891 -0.837 -0.739 -0.680 -0.608 -0.581 -0.402 -0.328

7.999

2.125

2.332 2.125

2.718

4.034

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

4.551

-0.018

-0.028 -0.030

-0.028 0 0 0

4.551 5.818 6.617

Standardized Annual Balance Sheet
										1/29/21
4690000
Short Term Investments
Cash & Equivs & ST Investments	5196000	658000	1300000	1057000	661000	530000	796000
Receivables (ST)
		Inventories		16193000		13179000		11393000		8911000		9127000		8600000		8355000		8321000		8249000	8209000		7144000
Current Tax Assets
Other Current Assets		938000	689000	234000	330000	213000
Total Current Assets	22326000	15318000	14228000	12772000	12000000	10080000	9251000	8314000
Gross Property Plant & Equip	36940000	35443000	35074000	34666000	32268000	31477000	25104000
Accumulated Depreciation	17276000	17431000	17219000	14240000	12362000	11256000
Net Property Plant & Equip	19155000	19577000	21970000	22499000	22722000	21361000
Long Term Investments
Intangible Assets	1307000	1082000
Deferred LT Assets
Other Assets	4714000	4593000	460000
				Total Assets				46735000				35291000				31827000				32686000				30869000
Accounts Payable & Accrued Exps	13044000	9088000	9613000	7930000	8047000	6998000	6408000	6253000	5753000	5018000	4864000	4543000	4137000	3896000
4657000	4109000	3524000
2160000	1429000	1334000	1340000	1396000	1365000	1284000	1245000	1096000
Current Debt	2538000	1832000	1431000	1305000		1104000		1021000
Other Current Liabilities	4574000	3556000	3052000	2622000	2390000	2388000	2188000	1908000	1932000	2065000	1939000	2458000	2510000	2532000
Total Current Liabilities	18730000	9348000	8876000	7708000	7119000
LT Debt & Leases	20668000	11545000	5576000
Deferred LT Liabilities	1170000	1235000	1098000
Minority Interests
Other Liabilities	4881000	4655000
Total Liabilities	45298000	12042000
Common Share Capital
Additional Paid-In Capital
Accum Other Comprehensive Income	-240000
Other Equity
						Total Equity
Total Liabilities & Equity
Standardized Annual Income Statement
Sales Revenue				71309000				68619000				47220000				48230000				46927000
				Total Revenue
	Direct		Costs		49205000	31663000
Gross Profit	29572000	19558000	17152000
Selling General & Admin	15367000	14115000	11688000
Depreciation & Amortization
Other Operating Expense
Total Indirect Operating Costs	19925000	16629000	18890000	16823000	16618000	15599000	14766000	14327000	13767000	14073000	13592000	13351000	12715000	12022000	11046000
				Operating Income			4792000			4149000						3560000			3277000			3112000			3786000		4705000		5152000
Interest Income		-624000		-423000		-280000		-154000
Other Non-Operating Income	-1060000
Total Non-Operating Income	-1908000	-1097000
		Earnings Before Tax
		Taxation			1387000
Extraordinary Items
Accounting Changes
							Net Income
Preference Dividends & Similar	-29000
Net Income to Common	5811000	1993000	1770000
							Average	1535000
EPS Net Basic
EPS Continuing Basic
Average Shares Diluted
				EPS Net Diluted
EPS Continuing Diluted
					Shares Outstanding			1354000
Standardized Annual Retained Earnings
Retained Earnings at Start
Retained Earnings at End
Standardized Annual Cash Flows
Adjustments from Inc to Cash	3319000	2282000	3121000	2114000	2153000	2260000		1616000	1714000	2196000	1769000	1905000	1931000
Change in Working Capital	1895000	-2267000	758000	-496000	-22000	568000	-78000
				Cash Flow from Operations			4349000
Purchase of Pty Plant & Equip		-1123000
Purchase of Investments	-1059000	-1061000	-932000	-1663000	-1665000	-1827000	-1358000	-2508000	-842000
Disposal of Investments	1114000	1784000	1425000	2345000	987000
Change in Business Activities
Other Investing Cash Flows	-72000	-44000
Cash Flow from Investing	-1437000
Change in ST Debt
Change in LT Debt	2311000	2859000	2094000	1166000	1191000		956000
Change in Equity	-4819000	-4195000	-2923000	-3053000	-3456000	-3800000	-3768000	-3545000	-4044000	-2837000	-2513000	-2120000	-1549000
		Payment of Dividends
Other Financing Cash Flows
Cash Flow from Financing	-2735000	-5124000
Effect of Exchange Rate
Cash from Discontinued Ops
Change in Cash
		Open
Closing Cash
Depn & Amortn (CF)
Net Purch of Pty Plant & Equip
Standardized Annual CS Balance Sheet
Cash & Equivalents %TA	10.035	1.814			1.48	1.666	1.622	1.295	1.464	1.195	1.656	3.022	1.935	1.915	0.750	0.910	1.311
Short Term Investments %TA	1.083			0.40	0.632	0.289	0.291	0.982	0.393	0.565	0.383			0.852	1.398	1.288	1.273	0.807	1.556
Cash & Equivs & ST Investments %TA	11.118	2.219	2.113	1.955	1.912	2.277	1.857	1.760				2.03	3.874	3.332	3.203	2.022	1.717	2.867
Receivables (ST) %TA
Inventories %TA		34.64	33.389	36.400	32.283	30.394	30.250	27.998	27.884	26.327	24.896	24.692	24.993	25.115	24.656	25.728
Current Tax Assets %TA	0.723		0.77	0.664	0.545		0.57	0.630		0.50	0.800	0.580
Other Current Assets %TA	2.005	3.200		2.718	1.952	2.569	1.251	1.093	1.042	0.921	0.697	0.979	0.661	0.658		0.965	0.767
Total Current Assets %TA	47.771	38.808	41.231	36.191		34.87	33.778	31.671	3			1.45	29.952	30.013	29.577	29.486	28.303	2	8.13	29.942
Gross Property Plant & Equip %TA	78.532	91.067	103.927	104.673	107.295	114.863	111.361	107.155	106.123	10	2.30	98.950	9		7.767	96.301	93.414	90.409
Accumulated Depreciation %TA	37.546	43.769	50.513	48.791	49.317	52.248	4		8.415	43.505	40.375	36.837	33.402	29.599	26.785	24.215	22.087
Net Property Plant & Equip %TA	40.986	47.298	53.414	5	5.88	57.978	62.614	62.947	63.650	65.747	6	5.46	65.548	68.168	69.516	69.199	68.322
LT Investments %TA	0.428		0.94	0.742	1.156	1.064	0.710	1.112	0.830			1.50	2.991	0.839	0.774	1.649	0.594
Intangible Assets %TA	0.768	0.878	3.703	3.145
Deferred LT Assets %TA	0.728	0.547	0.476	0.645	0.771
Other Assets %TA	10.087	1		1.63	2.883	2.593		2.29	2.127	4.270	4.042	3.471	3.019	1.884	1.506		1.40	1.014	1.142
Total Assets as 10																	0%
Accounts Payable & Accrued Exps %TA	27.911	23.024	27.857	22.470	23.387		22.38	20.134	19.104	17.612	15.993	14.891	14.737	13.899	13.402		14.03
Accounts Payable %TA	23.289	1	9.40	23.992	18.673	19.330	18.016	16.100	15.300	14.256	12.968		12.91	12.989	12.571	12.028	12.691
Accrued Expenses %TA	4.622	3.620		3.86	3.797	4.057	4.366		4.034	3.804	3.355	3.025	1.979	1.748	1.328	1.374	1.340
Current Debt %TA	2.379	6.430	5.309	4.055	3.793	3.531	1.734	1.329	0.144	1.764			0.10	1.672	3.124	3.576	0.400
Other Current Liabilities %TA	9.787		9.00	8.844	7.750	7.620	7.644	7.503	6.685	5.841	5.757	6.128	5.875	7.520	8.131	9.119
Total Current Liabilities %TA	40.077	38.464	42.011	34.275	3	4.80			33.55	2	9.37		27.11	23.596	2	3.51	21.125	22.285	24.543	25.109	23.550
LT Debt & Lease %TA	44.224	42.482	41.703	44.102	41.833	36.925	33.981	30.814	27.643	20.963	19.398	1	3.71	15.416	18.063	15.576
Deferred LT Liabilities %TA			2.18	2.265	2.397	2.275	2.218		2.332	2.598	3.119	3.582	3.680		3.25	1.812	2.019	2.170	2.647
Minority Interests %TA
Other Liabilities %TA	10.444	11.793	3.330		2.706	2.450	2.730		2.737	2.758	2.578	2.472	4.408	2.784	2.507	1.595
Total Liabilities %TA	96.925	9	5.00	89.440	83.358	81.301	75.520	68.681	63.788	57.580	50.735	46.254	42.224	44.762	47.851	43.368
Common Share Capital %TA	0.783	1.162	1.176	1.258	1.508	1.573	1.699	1.850	2.009			2.20	2.249	2.362	2.744
Additional Paid-In Capital %TA	0.193	0.062	0.080	0.042	0.033	0.018	0.847	0.052	0.367
Retained Earnings %TA	2.390	4.375	1									0.00	15.372	18.138	24.285	30.135	34.691	40.482	47.236	51.548	55.467	52.160	49.710	53.517
Accum Other Comprehens Income %TA	-0.291	-0.345	–	0.60	0.031	-0.698	-1.260	-0.324	-0.052		0.15	0.137	0.157	0.082		-0.018				0.02	0.004
Other Equity %TA
Total Equity %TA	3.075	4.996	10.560	16.642	18.699	24.480	31.319	36.212	42.420	49.265	53.746	57.776	55.238	52.149	56.632
Total Liabilities & Equity %TA
Standardized Annual CS Income Statement
Sales Revenue %TR
Total Revenue (100% TR)
Direct Costs %TR	66.994	68.200	67.875	65.886	65.449	65.179	65.214	65.412	65.703	65.444	64.863	65.136	6	5.78	6		5.35	65.483
		Gross Profit %TR	3	3.00		31.80	3		2.125			34.11	3			4.551			34.82		34.786		34.588			34.29		34.55	35.137	34.86	34.21	34.644	34.517
Selling General & Admin %TR	20.677	21.299	24.419	2	2.40	23.269	23.894	23.622	24.084	24.235	25.082	24.595	24.752	22.961	2				1.77	20.751
Depreciation & Amortization %TR	1.561	1.749	2.071	2.109	2.290	2.512	2.641	3.015	2.948	3.249	3.418			3.19	2.829	2.476
Other Operating Expense %TR	0.104	0.211	0.292	0.311
Total Indirect Operating Costs %TR	22.238	23.048	26.490	24.517	25.559	26.406	26.263	26.821	27.250	28.029	27.844	28.274	26.363	24.899	23.539
		Operating Income %TR		10.767		8.751		5.635		9.598			8.99			8.52		7.047		6.527		7.293	6.590	7.850		9.745	10.979
Interest Income %TR	-0.946		-0.958		-0.875	-0.922		-0.992		-0.934		-0.918		-0.891		-0.837		-0.739		-0.680		-0.608		-0.581		-0.402	-0.328
Other Non-Operating Income %TR	-1.183	-0.676
Total Non-Operating Income %TR	-2.130	-1.599
Earnings Before Tax %TR	8.638	7.794	4.760		7.999	7.480		7.60	6.876	6.209	5.788	6.613	5.983	7.269	9.343	10.651
Taxation %TR	1.860	1.515	2.976	3.242	3.171	2.807	2.597	2.495	2.207	3.525
Extraordinary Items %TR
Accounting Changes %TR
		Net Income %TR			6.51		5.934		3.245			5.02		4.757			4.31		4.799	4.280		3.878		3.663		4.118	3.776		5.818	6.617
Preference Dividends & Similar %TR	-0.027	-0.010	-0.016	-0.045	-0.020			-0.028		-0.030	-0.035
Net Income to Common %TR	6.486	5.916	3.235	5.007	4.710	4.290	4.770	4.250		3.85		3.63	4.083	3.748

Ind ratios

Exchange rate used is that of the Year End reported date
Profitability Ratios 12/29/2019 12/30/2018 12/31/2017 01/01/2017 01/03/2016 12/28/2014 12/29/2013 12/30/2012 01/01/2012 01/02/2011 01/03/2010 12/28/2008 12/30/2007 12/31/2006 01/01/2006

ROA % (Net)

11.51

9.37

7.88

10.54

ROE % (Net)

15.41

ROI % (Operating)

EBITDA Margin %

11.04

10.14 9.69

10.62

Calculated Tax Rate %

34.87

Revenue per Employee

.33

Liquidity Ratios 12/29/2019 12/30/2018 12/31/2017 01/01/2017 01/03/2016 12/28/2014 12/29/2013 12/30/2012 01/01/2012 01/02/2011 01/03/2010 12/28/2008 12/30/2007 12/31/2006 01/01/2006
Quick Ratio 0.34 0.16 0.15 0.19 0.19 0.21 0.19 0.19 0.21 0.23 0.18

0.14 0.12 0.21

Current Ratio 1.13 0.96 0.96 1.00 1.04 1.10 1.14 1.15 1.15 1.24 1.21 1.18 1.08

1.19

Net Current Assets % TA 4.73

1.26 2.84

5.14

3.87 1.73 0.27 4.22

Debt Management 12/29/2019 12/30/2018 12/31/2017 01/01/2017 01/03/2016 12/28/2014 12/29/2013 12/30/2012 01/01/2012 01/02/2011 01/03/2010 12/28/2008 12/30/2007 12/31/2006 01/01/2006
LT Debt to Equity

4.57

2.65 1.79 1.14 0.87 0.57 0.56

0.40 0.45 0.50 0.42

Total Debt to Equity 9.02 5.26

7.36 2.83 1.88

0.94 0.66 0.60 0.54 0.45 0.54 0.62 0.46

Interest Coverage

14.03

11.26

Asset Management 12/29/2019 12/30/2018 12/31/2017 01/01/2017 01/03/2016 12/28/2014 12/29/2013 12/30/2012 01/01/2012 01/02/2011 01/03/2010 12/28/2008 12/30/2007 12/31/2006 01/01/2006
Total Asset Turnover 2.18 2.19 2.29

2.20 2.14 2.07 1.97

1.87 1.85 1.83

1.88 2.03

Receivables Turnover

Inventory Turnover 6.36 5.94 6.04

5.88 5.78

5.58 5.64 5.68 5.73 5.65 5.67

Accounts Payable Turnover

12.62 12.72

12.91

Accrued Expenses Turnover 34.29 34.82

31.57

53.48

Property Plant & Equip Turnover 5.33 4.60

4.24

3.75 3.54 3.34 3.18

3.00 2.96 3.06 3.15 3.51

Cash & Equivalents Turnover 33.55

Per Share 12/29/2019 12/30/2018 12/31/2017 01/01/2017 01/03/2016 12/28/2014 12/29/2013 12/30/2012 01/01/2012 01/02/2011 01/03/2010 12/28/2008 12/30/2007 12/31/2006 01/01/2006
Cash Flow per Share

9.00

8.58 8.13 7.02 6.67 5.46 5.14

4.01 4.21 4.00 3.67 3.84

Book Value per Share

8.69 9.35 11.57 12.18

12.59 12.64

Average of firm & competitors
	13.42	13.94	11.53	11.59	10.81	10.73	8.47	7.81	6.84	6.80	8.88
	4820.14	86.55	28.82	122.64	70.08	45.67	3	4.60	24.82	20.30	18.02	17.29	15.02	19.37	20.87
	38.02		34.56	30.28	32.67	31.14	28.64	27.18	2	3.90	21.19	19.45	1		9.02	17.09	17.22	21.32	25.71
1				1.00		11.16	9.53	11.44	1	1.10	11.12		10.62	9.84	9.21	9.03	11.21
	27.39	2	3.97	30.93	35.70	36.37	35.17	35.68	35.25	35.10	35.54	34.48	3	5.73	36.11	36.52
	256372	243377.00	243308.67	228163.67	221625.33	223031.67	219168.33	212485.00	211919.00	205198.00	207491.67	200611.67	208602.67	211477.00	219271.33
		0.20
1.03
-1.21	-1.25	-0.38		3.81		3.84		3.34	4.39
	8.60	2.32	6.60	0.49
2.63	1.20
	11.91	10.57	1	0.90		11.57	11.15	11.47	11.32	12.05	10.79	9.80		10.40	16.04	24.45
2.25	1.90					1.89
	69.55	69.04	70.62	69.12	66.49	65.19	65.04	63.72	64.69	70.83	78.97	84.99	85.55	75.31	1795.87
6.00	5.69	5.59	5.83
	11.65	11.48	11.62	12.01		12.18	12.63	12.77	12.95	12.92	13.19	12.66	13.82
35.06	33.65	32.05	31.78	31.69	32.00	35.59	41.49	46.08	56.60	57.14
4.46			4.00	3.08
78.47	80.27	75.51	78.33	78.38	78.81	71.31	54.43	59.72	66.91	76.72	131.73	118.10	100.31
15.04			9.47			4.88
11.24	12.97	14.24	14.72	15.83	15.27	14.84	14.39	13.13

charts for ratios

Lowe’s Companies Inc (NYS: LOW)
Exchange rate used is that of the Year End reported date

Profitability Ratios

ROA % (Net) 13.57 11.61 6.65 9.92 9.3 8.09 8.38 7.01 5.93 5.38 6.04 5.4 6.93 9.61 12
ROE % (Net)

152.88 48.76 56.17 43.2 28.98

17.83 12.93 10.44 10.84 9.63 12.89

ROI % (Operating)

30.78

27.11

18.36 15.16

14.62 12.93 16.19 21.98 27.17

EBITDA Margin % 11.26 10.7 7.60

11.16

10.1 9 10.5 10.01 11.04 12.6 13.45

Calculated Tax Rate % 24.6

31.82

40.53

37.76 37.55 36.72 37.73 36.88 37.39 37.73

Revenue per Employee 264245 226082 238350 221960 220571 219394 211945 204442 206775 199177 209184 198116 211190 224147 224076

Liquidity Ratios Jan-21 Jan-20 Feb-19 Feb-18 Feb-17 Jan-16 Jan-15 Jan-14 Feb-13 Feb-12 Jan-11 Jan-10 Jan-09 Feb-08 Feb-07
Quick Ratio 0.28 0.06 0.05 0.06 0.1 0.07 0.06 0.06 0.09 0.16 0.2 0.14 0.08 0.07 0.12
Current Ratio 1.19 1.01 0.98 1.06 1.00 1.01 1.08 1.16 1.27 1.3 1.40 1.32 1.2 1.12 1.27
Net Current Assets % TA 7.69 0.34 -0.78 1.92 0.1 0.22 2.3 4.34 6.36

8.45 7.2 3.76 3.03 6.39

Debt Management Jan-21 Jan-20 Feb-19 Feb-18 Feb-17 Jan-16 Jan-15 Jan-14 Feb-13 Feb-12 Jan-11 Jan-10 Jan-09 Feb-08 Feb-07
LT Debt to Equity 14.38 8.5 3.95 2.65 2.24 1.51 1.08 0.85 0.65 0.4 0.36 0.24 0.28 0.35 0.28
Total Debt to Equity 15.16 9.79 4.45 2.89 2.44 1.65 1.14 0.89 0.66 0.46 0.4 0.27 0.34 0.41 0.28
Interest Coverage 11.38 9.14 6.44 10.40 9.06 9.01 9.29 9 8.42 8.83

10.84 13.52 24.25 33.45

Asset Management Jan-21 Jan-20 Feb-19 Feb-18 Feb-17 Jan-16 Jan-15 Jan-14 Feb-13 Feb-12 Jan-11 Jan-10 Jan-09 Feb-08 Feb-07
Total Asset Turnover 2.08 1.96 2.05 1.97 1.95 1.9 1.75 1.64 1.53 1.47 1.47 1.44 1.52 1.65 1.79

Receivables Turnover – – – – – – – – – – – – – – 5228.44

Inventory Turnover 4.09 3.82 4.04 4.14 4.3 4.19 4.07 3.9 3.92 3.94 3.82 3.7 4.01 4.28 4.44
Accounts Payable Turnover 9.69 9.08 9.6 10.39 10.41 11.01

11.1 11.25 11.35 11.33 11.28

13.38 14.81

Accrued Expenses Turnover 50.07 52.37 53

46.34 44.72 44.58 45.76

58.7

121.65 118.23

Property Plant & Equip Turnover 4.75 3.90 3.75 3.5 3.24 2.99 2.76 2.53 2.33 2.24 2.20 2.09 2.19 2.40 2.66
Cash & Equivalents Turnover 33.2 117.92 130.13 120.08

136.02

114.94 65.16

76.2 107.98

150.13 119.58

Per Share Jan-21 Jan-20 Feb-19 Feb-18 Feb-17 Jan-16 Jan-15 Jan-14 Feb-13 Feb-12 Jan-11 Jan-10 Jan-09 Feb-08 Feb-07
Cash Flow per Share 14.81 5.54 7.66 6.05 6.28 5.17 5.00 3.9 3.28 3.37 2.76 2.78 2.84 2.94 2.94
Book Value per Share 1.97 2.58 4.55 7.08 7.4 8.41 10.38 11.51

13.32 13.38 13.07

11.04 10.31

							Jan-21	Jan-20	Feb-19	Feb-18	Feb-17	Jan-16	Jan-15	Jan-14	Feb-13	Feb-12	Jan-11	Jan-10	Jan-09	Feb-08	Feb-07
	343.27	24.80	17.70	20.71
	43.48	18.86	29.35	23.94	21.99	13.20
10.96	11.30	10.93	10.50
23.87	37.20	42.39	36.90	37.88
6.50
10.72
11.13	12.37
50.30	48.00	78.70	93.67	112.73
132.9	131.57	59.30	183.89
12.48	12.28

Profitability ratios

ROA % (Net) 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 13.57 11.61 6.65 9.92 9.27 8.09 8.3800000000000008 7.01 5.93 5.38 6.04 5.44 6.93 9.61 11.87 ROE % (Net) 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 343.27 152.88 48.76 56.17 43.2 28.98 24.8 17.829999999999998 12.93 10.44 10.84 9.6300000000000008 12.89 17.7 20.71 ROI % (Operating) 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 43.48 30.78 18.86 29.35 27.11 23.94 21.99 18.36 15.16 13.2 14.62 12.93 16.190000000000001 21.98 27.17 EBITDA Margin % 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 11.26 10.69 7.6 10.96 11.3 10.93 11.16 10.5 10.06 9.4700000000000006 10.54 10.01 11.04 12.57 13.45 Calculated Tax Rate % 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 24.6 23.87 31.82 37.200000000000003 40.53 42.39 36.9 37.76 37.549999999999997 36.72 37.72 9999999999997 36.880000000000003 37.39 37.729999999999997 37.880000000000003

Revenue per employee

Revenue per Employee 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 264245 226082 238350 221960 220571 219394 211945 204442 206775 199177 209184 198116 211190 224147 224076

Liquidity Ratios

Quick Ratio 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 0.28000000000000003 0.06 0.05 0.06 0.05 7.0000000000000007E-2 0.06 0.06 0.09 0.16 0.16 0.14000000000000001 0.08 7.0000000000000007E-2 0.12 Current Ratio 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 1.19 1.01 0.98 1.06 1 1.01 1.08 1.1599999999999999 1.27 1.28 1.4 1.32 1.1499999999999999 1.1200000000000001 1.27 Net Current Assets % TA 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115

Debt Management Ratios

LT Debt to Equity 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 14.38 8.5 3.95 2.65 2.2400000000000002 1.51 1.08 0.85 0.65 0.43 0.36 0.24 0.28000000000000003 0.35 0.28000000000000003 Total Debt to Equity 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 15.16 9.7899999999999991 4.45 2.89 2.44 1.65 1.1399999999999999 0.89 0.66 0.46 0.36 0.27 0.34 0.41 0.28000000000000003 Interest Coverage 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 11.38 9.14 6.44 10.4 9.06 9.01 9.2899999999999991 8.7200000000000006 8.42 8.83 10.72 10.84 13.52 24.25 33.450000000000003

Asset Management Ratios

Total Asset Turnover 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 2.08 1.96 2.0499999999999998 1.97 1.95 1.88 1.75 1.64 1.53 1.47 1.47 1.44 1.52 1.65 1.79 Property Plant & Equip Turnover 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 4.75 3.9 3.75 3.47 3.24 2.99 2.76

2.52

99999999999998 2.33 2.2400000000000002 2.2000000000000002 2.09 2.19 2.4 2.66

Asset Management Ratios

Receivables Turnover 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5228.4399999999996 Inventory Turnover 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 4.09 3.82 4.04 4.1399999999999997 4.2699999999999996 4.1900000000000004 4.07 3.94 3.92 3.94 3.82 3.74 4.01 4.2 8 4.4400000000000004 Accounts Payable Turnover 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 9.69 9.08 9.6199999999999992 10.39 10.41 11.01 11.13 11.08 11.25 11.35 11.33 11.28 12.37 13.38 14.81 Accrued Expenses Turnover 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 50.07 52.37 53.48 50.3 46.34 44.72 44.58 45.76 48 58.73 78.7 93.67 112.73 121.65 118.23 Cash & Equivalents Turnover 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115

33.24

117.92 130.13 120.08 132.85 136.02000000000001 131.57 114.94 65.16 59.3 76.239999999999995 107.98 183.89 150.13 119.58 Total Asset Turnover 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 2.08 1.96 2.0499999999999998 1.97 1.95 1.88 1.75 1.64 1.53 1.47 1.47 1.44 1.52 1.65 1.79 Property Plant & Equip Turnover 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 4.75 3.9 3.75 3.47 3.24 2.99 2.76 2.5299999999999998 2.33 2.2400000000000002 2.2000000000000002 2.09 2.19 2.4 2.66

Per Share data

Cash Flow per Share 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 14.81 5.54 7.66 6.05 6.28 5.17 5 3.89 3.28 3.37 2.76 2.78 2.84 2.94 2.94 Book Value per Share 44225 43861 43497 43133 42769 42398 42034 41670 41306 40942 40571 40207 39843 39479 39115 1.97 2.58 4.55 7.08 7.43 8.41 10.38 11.51 12.48 13.32 13.38 13.07 12.28 11.04 10.31

comparison

01/29/2021 01/31/2021 01/31/2021 12/29/2019
Profitability Ratios LOW HD WMT Average
ROA % (Net) 13.57

5.51 13.42

ROE % (Net) 343.27 14099.83 17.32 4820.14
ROI % (Operating) 43.48

17.37 38.02

EBITDA Margin % 11.26

6.07

Calculated Tax Rate %

33.35 27.39

Revenue per Employee 264245 262427 242445 256372
Liquidity Ratios LOW HD WMT Average
Quick Ratio 0.28 0.47 0.26 0.34
Current Ratio 1.19 1.23 0.97 1.13
Net Current Assets % TA 7.69 7.52 -1.02 4.73
Debt Management LOW HD WMT Average
LT Debt to Equity 14.38

0.56 8.60

Total Debt to Equity 15.16 11.29 0.6 9.02
Interest Coverage 11.38 14.06 10.28 11.91
Asset Management LOW HD WMT Average
Total Asset Turnover 2.08 2.17 2.28 2.18
Receivables Turnover –

87.13 69.55

Inventory Turnover 4.09

9.40 6.36

Accounts Payable Turnover 9.69 13.66

11.65

Accrued Expenses Turnover 50.07 27.32

34.29

Property Plant & Equip Turnover 4.75 5.58 5.65 5.33
Cash & Equivalents Turnover 33.24 26.42 40.99 33.55

Ratio comparison
21.18
53.20
15.67	11.00
24.60	24.22
10.86
51.97
5.60
11.60
25.49

Market value ratios

LOW HD WMT

27.17

1.83 2.93 0.7

19.4

4.88

2.08

0.77

21.2

LOW HD WMT

22.38

/Revenue

1.94 3 0.71 2.52 2.24 Obtained from

– 418.71 4.88 400 6

1.67 D&B Hoovers

23.9

Current Market Multiples
Market Cap/Earnings (TTM)	21.14	49.83
Market Cap/Equity (MRQ)	-110.5		418.71	4.42
Market Cap/Revenue (TTM)
Market Cap/EBIT (TTM)	14.78	26.04
Market Cap/EBITDA (TTM)	12.79	17.25	15.33
Enterprise Value/Earnings (TTM)	24.09	29.69	54.98		Obtained from
Enterprise Value/Equity (MRQ)	-125.9	457.55
Enterprise Value/Revenue (TTM)	3.21		D&B Hoovers
Enterprise Value/EBIT (TTM)	16.84	28.73	Annual Ratios
Enterprise Value/EBITDA (TTM)	14.57	18.85	16.91
Valuation Ratios	Industry	Sector
P/E Ratio	27.72	50.59	25.51	37.31
		Price
Price/Book
Price to Cash Flow per Share	21.11	29.89	13.84	25.84
Price to Free Cash Flow per Share	26.87	36.55	32.57	Ratio Comparisons

Analysis LOW

Report Date Jan-21 Jan-20 Feb-19 Feb-18 Feb-17 Jan-16 Jan-15 Jan-14 Feb-13 Feb-12 Jan-11 Jan-10 Jan-09 Feb-08 Feb-07
Raw numbers

Total Assets 46735000 39471000 34508000 35291000 34408000 31266000 31827000 32732000 32666000 33559000 33699000 33005000 32686000 30869000 27767000
Total Equity 1437000 1972000 3644000 5873000 6434000 7654000 9968000 11853000 13857000 16533000 18112000 19069000 18055000 16098000 15725000
Total Revenue 89597000 72148000 71309000 68619000 65017000 59074000 56223000 53417000 50521000 50208000 48815000 47220000 48230000 48283000 46927000
Operating Income 9647000 6314000 4018000 6586000 5846000 4971000 4792000 4149000 3560000 3277000 3560000 3112000 3786000 4705000 5152000
Net Income 5835000 4281000 2314000 3447000 3093000 2546000 2698000 2286000 1959000 1839000 2010000 1783000 2195000 2809000 3105000
Shares Outstanding 731000 763000 801000 830000 866000 910000 960000 1030000 1110000 1241000 1354000 1459000 1470000 1458000 1524500
EPS Net Diluted 7.75 5.49 2.84 4.09 3.47 2.73 2.71 2.14 1.69 1.43 1.42 1.21 1.49 1.86 1.99

Cash dividends per share 2.30 2.13 1.85 1.58 1.33 1.07 0.87

0.70

0.62 0.53 0.42 0.36 0.34 0.29 0.18

Number of full time employees 220000 200000 190000 200000 190000 180000 175000 167000 160000 161000 161000 166000 164000 160000 157000
Cash Flow from Operations 11049000 4296000 6193000 5065000 5617000 4784000 4929000 4111000 3762000 4349000 3852000 4054000 4122000 4347000 4502000

Recent growth Last year Last 2 years Last 3 years Last 5 years Last 7 years Last 10 years Total Assets

18.

4% 1

6.4% 9.8% 6.

3% 5.2% 3.3% Total Equity

–

27.1% –

37.2% -37.

5% -2

5.9% -2

6.0% -2

2.4% Total Revenue

24.2% 1

2.1% 9.3% 6.6% 7.

6.3%
Operating Income

2.8% 54.9% 13.6% 10.5% 12.8%

10.5%
Net Income

36.3% 58.8% 19.2% 1

3.5% 1

4.3% 1

1.2% Shares Outstanding

-4.2% –

4.5% –

4.1% -3.3% –

4.8% -6.0% EPS Net Diluted

41.2% 65.2% 2

3.7% 1

7.4% 2

0.2% 1

8.5% Cash dividends per share

8.0% 11.5% 13.3% 11.6% 18.5%

18.5%
Number of full time employees

0.0% 7.6% 3.2% 3.0% 4.0%

3.2%
Cash Flow from Operations

157.2% 33.6% 2

9.7% 14.5% 15.2% 11.1%

Raw numbers

Growth

Numbers

Data sorted for charts 1 4 5 6 7 8 9 10 11 12 13
1 Total Assets Total Equity Total Revenue Operating Income Net Income Shares Outstanding EPS Net Diluted Cash dividends per share Number of full time employees Cash Flow from Operations
Total Assets Total Equity Total Revenue Operating Income Net Income Shares Outstanding EPS Net Diluted Cash dividends per share Number of full time employees Cash Flow from Operations
Feb-07 16 27767000 15725000 46927000 5152000 3105000 1524500 1.99 0.18 157000 4502000 Feb-07
Feb-08 15 30869000 16098000 48283000 4705000 2809000 1458000 1.86 0.29 160000 4347000 Feb-08

11.2%

2.4%

2.9% –

8.7% -9.5% –

4.4% –

6.5% 61.1% 1.9% –

3.4% Jan-09 14 32686000 18055000 48230000 3786000 2195000 1470000 1.49 0.335 164000 4122000 Jan-09 5.9%

12.2% -0.1% -19.5% –

21.9% 0.8% –

19.9% 1

5.5% 2.5% -5.2% Jan-10 13 33005000 19069000 47220000 3112000 1783000 1459000 1.21 0.355 166000 4054000 Jan-10

1.0% 5.6% -2.1% -17.8% –

18.8% –

0.7%

-18.8% 6.0% 1.2%

-1.6% Jan-11 12 33699000 18112000 48815000 3560000 2010000 1354000 1.42 0.42 161000 3852000 Jan-11 2.1%

–

5.0%

3.4%

14.4% 12.7% -7.2%

17.4%

18.3% -3.0%

-5.0%
Feb-12 11 33559000 16533000 50208000 3277000 1839000 1241000 1.43 0.53 161000 4349000 Feb-12

-0.4%

-8.7% 2.9%

-7.9% -8.5% -8.3%

0.7%

6.2%

0.0%

12.9% Feb-13 10 32666000 13857000 50521000 3560000 1959000 1110000 1.69 0.62 160000 3762000 Feb-13

-2.7% –

16.2% 0.6% 8.6%

6.5%

-10.6% 18.2% 1

7.0% -0.6% -13.5% Jan-14 9 32732000 11853000 53417000 4149000 2286000 1030000 2.14 0.7 167000 4111000 Jan-14 0.2%

-14.5% 5.7% 16.5% 1

6.7%

-7.2%

26.6%

12.9% 4.4% 9.3%
Jan-15 8 31827000 9968000 56223000 4792000 2698000 960000 2.71 0.87 175000 4929000 Jan-15

-2.8% -15.9% 5.3% 15.5% 18.0% -6.8%

26.6%

24.3%

4.8% 19.9%
Jan-16 7 31266000 7654000 59074000 4971000 2546000 910000 2.73 1.07 180000 4784000 Jan-16

-1.8% -23.2% 5.1%

3.7%

-5.6%

-5.2% 0.7%

23.0%

2.9%

-2.9% Feb-17 6 34408000 6434000 65017000 5846000 3093000 866000 3.47 1.33 190000 5617000 Feb-17

10.0%

-15.9%

10.1% 17.6% 21.5% -4.8%

27.1% 24.3% 5.6% 17.4%
Feb-18 5 35291000 5873000 68619000 6586000 3447000 830000 4.09 1.58 200000 5065000 Feb-18

2.6%

-8.7% 5.5% 12.7%

11.4%

-4.2%

17.9%

18.8% 5.3%

-9.8% Feb-19 4 34508000 3644000 71309000 4018000 2314000 801000 2.84 1.85 190000 6193000 Feb-19

-2.2% -38.0% 3.9% -3

9.0% -32.9% -3.5% –

30.6% 17.1%

-5.0%

22.3% Jan-20 3 39471000 1972000 72148000 6314000 4281000 763000 5.49 2.13 200000 4296000 Jan-20 14.4%

-45.9%

1.2%

57.1% 85.0% -4.7% 93.3% 15.1%

5.3% -30.6%
Jan-21 2 46735000 1437000 89597000 9647000 5835000 731000 7.75 2.3 220000 11049000 Jan-21

18.4% -27.1%

24.2% 52.8% 36.3% -4.2% 41.2% 8.0% 10.0% 157.2%
Important ratios (DuPont and others) 1/29/21 1/31/20

2/1/19 2/2/18 2/3/17 1/29/16 1/30/15 1/31/14 2/1/13 2/3/12 1/28/11 1/29/10 1/30/09 2/1/08 2/2/07

Inventories 16193000 13179000 12561000 11393000 10458000 9458000 8911000 9127000 8600000 8355000 8321000 8249000 8209000 7611000 7144000
Direct Costs 60025000 49205000 48401000 45210000 42553000 38504000 36665000 34941000 33194000 32858000 31663000 30757000 31729000 31556000 30729000

Profit margin

6.5% 5.9% 3.2% 5.0% 4.8% 4.3% 4.8% 4.3% 3.9% 3.7% 4.1%

3.8% 4.6% 5.8%

6.6%
TATO

1.92 1.83 2.07 1.94 1.89 1.89 1.77 1.63 1.55 1.50 1.45 1.43 1.48 1.56 1.69
ROA

12.5% 10.8%

6.7% 9.8% 9.0%

8.1%

8.5% 7.0% 6.0% 5.5% 6.0%

5.4%

6.7%

9.1%

11.2%
EM 32.52 20.02

9.47 6.01 5.35 4.08 3.19 2.76 2.36 2.03 1.86 1.73 1.81 1.92 1.77
ROE

406.1% 217.1% 63.5% 58.7% 48.1% 33.3%

27.1%

19.3% 14.1%

11.1% 11.1%

9.4%

12.2% 17.4%

19.7% Inventory turnover

3.7 3.7 3.9 4.0 4.1 4.1 4.1 3.8 3.9 3.9 3.8 3.7 3.9 4.1 4.3
From

standardized CS Income statement Gross Profit %TR

33.006

31.8

32.125

34.114

34.551 34.821

34.786 34.588

34.297

34.556 35.137 34.864 34.213 34.644 34.517
Operating Income %TR 10.767 8.751 5.635 9.598 8.991 8.415 8.523 7.767 7.047 6.527 7.293 6.59 7.85 9.745 10.979
Net Income %TR 6.512 5.934 3.245 5.023 4.757 4.31 4.799 4.28 3.878 3.663 4.118 3.776 4.551 5.818 6.617

Data sorted for charts

1 6 7 8 9 10 12 15 16 17
1 Profit margin TATO ROA EM ROE Inventory turnover Gross Profit %TR Operating Income %TR Net Income %TR
Feb-07 16 6.6% 1.69 11.2% 1.77 19.7%

4.30 34.52 10.98 6.62 Feb-08 15 5.8% 1.56 9.1% 1.92 17.4% 4.15 34.64

9.75 5.82 Jan-09 14 4.6% 1.48 6.7% 1.81 12.2% 3.87 34.21 7.85 4.55
Jan-10 13 3.8% 1.43 5.4% 1.73 9.4%

3.73

34.86 6.59 3.78
Jan-11 12 4.1% 1.45 6.0% 1.86 11.1% 3.81

35.14

7.29 4.12
Feb-12 11 3.7% 1.50 5.5% 2.03 11.1%

3.93

34.56 6.53 3.66
Feb-13 10 3.9% 1.55 6.0% 2.36 14.1% 3.86

34.30

7.05

3.88 Jan-14 9 4.3% 1.63 7.0% 2.76 19.3%

3.83 34.59

7.77 4.28
Jan-15 8 4.8% 1.77 8.5% 3.19 27.1% 4.11

34.79

8.52 4.80
Jan-16 7 4.3% 1.89 8.1% 4.08 33.3% 4.07 34.82 8.42 4.31
Feb-17 6 4.8% 1.89 9.0% 5.35 48.1% 4.07 34.55 8.99 4.76
Feb-18 5 5.0% 1.94 9.8% 6.01 58.7% 3.97 34.11

9.60

5.02
Feb-19 4 3.2% 2.07 6.7% 9.47 63.5% 3.85

32.13

5.64 3.25
Jan-20 3 5.9% 1.83 10.8% 20.02 217.1% 3.73 31.80 8.75 5.93
Jan-21 2 6.5% 1.92 12.5% 32.52 406.1% 3.71

33.01 10.77

6.51

Cost of debt

, historical costs 1/29/21 1/31/20 2/1/19 2/2/18 2/3/17 1/29/16 1/30/15 1/31/14 2/1/13 2/3/12 1/28/11 1/29/10 1/30/09 2/1/08 2/2/07

Total long-term debt 21780000 17365000 15501000

15858000

15189000 12606000 11367000 10135000 9077000 7627000 6573000 5080000 5073000 5616000 4413000
Cash paid for interest, net of amount capitalized 824000 671000 635000 654000 619000 535000 504000 454000 444000 361000 319000 314000 309000 198000 179000

Implied interest rate 3.78% 3.86% 4.

10% 4.12% 4.08% 4.

24% 4.43% 4.48% 4.89% 4.73% 4.85% 6.18% 6.09% 3.53% 4.06%

Recent growth Last year Last 2 years Last 3 years Last 5 years Last 7 years Last 10 years
Cash dividends per share 8.0% 11.5% 13.3% 11.6% 18.5% 18.5%

Historical payout ratio

1/29/21 1/31/20 2/1/19 2/2/18 2/3/17 1/29/16 1/30/15 1/31/14 2/1/13 2/3/12 1/28/11 1/29/10 1/30/09 2/1/08 2/2/07

Net Income 5835000 4281000 2314000 3447000 3093000 2546000 2698000 2286000 1959000 1839000 2010000 1783000 2195000 2809000 3105000
Payment of Dividends -1704000 -1618000 -1455000 -1288000 -1121000 -957000 -822000 -733000 -704000 -647000 -571000 -391000 -491000 -428000 -276000

Payout ratio 29.2% 37.8% 62.9% 37.4% 36.2% 37.6% 30.5% 32.1% 35.9% 35.2% 28.4%

21.9%

22.4%

15.2%

8.9%

ROE 406.1% 217.1% 63.5% 58.7% 48.1% 33.3% 27.1% 19.3% 14.1% 11.1% 11.1% 9.4% 12.2% 17.4% 19.7%

Sustainable growth 287.47% 135.04% 23.57% 36.76% 30.65% 20.76% 18.82% 13.10% 9.06% 7.21% 7.95% 7.

30% 9.44% 14.79% 17.99% Tax rate

1/29/21 1/31/20 2/1/19 2/2/18 2/3/17 1/29/16 1/30/15 1/31/14 2/1/13 2/3/12 1/28/11 1/29/10 1/30/09 2/1/08 2/2/07

Taxation 1904000 1342000 1080000 2042000 2108000 1873000 1578000 1387000 1178000 1067000 1218000 1042000 1311000 1702000 1893000
Earnings Before Tax 7739000 5623000 3394000 5489000 5201000 4419000 4276000 3673000 3137000 2906000 3228000 2825000 3506000 4511000 4998000

Implied rate 24.6% 23.9% 31.8%

37.2%

40.5% 42.4% 3

6.9%

37.8% 37.6%

36.7% 3

7.7%

36.9% 37.4% 37.7%

37.9% Capital structure

(book)

1/29/21 1/31/20 2/1/19 2/2/18 2/3/17 1/29/16 1/30/15 1/31/14 2/1/13 2/3/12 1/28/11 1/29/10 1/30/09 2/1/08 2/2/07

Total long-term debt 21780000 17365000 15501000 15858000 15189000 12606000 11367000 10135000 9077000 7627000 6573000 5080000 5073000 5616000 4413000
Total Equity 1437000 1972000 3644000 5873000 6434000 7654000 9968000 11853000 13857000 16533000 18112000 19069000 18055000 16098000 15725000

Value of firm (V) 23217000 19337000 19145000 21731000 21623000 20260000 21335000 21988000 22934000 24160000 24685000 24149000 23128000 21714000 20138000 D/V 93.8% 89.8% 81.0% 73.0% 70.2% 62.2% 53.3% 46.1% 3

9.6% 31.6%

26.6%

21.0%

21.9%

25.9%

21.9%
E/V

6.2%

10.2% 19.0% 27.0% 29.8%

37.8%

46.7% 53.9% 60.4% 68.4% 73.4% 79.0% 78.1% 74.1%

78.1%

LOW
Total Assets 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 27767000 30869000 32686000 33005000 33699000 33559000 32666000 32732000 31827000 31266000 34408000 35291000 34508000 39471000 46735000

LOW
Profit margin 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 6.6166599185969704E-2 5.8177826564215149E-2 4.5511092680904003E-2 3.7759423972892843E-2 4.1175868073338111E-2 3.6627629063097515E-2 3.877595455355199E-2 4.2795364771514688E-2 4.798747843409281E-2 4.30984866438704E-2 4.7572173431564051E-2 5.023390023171425E-2 3.2450321838758081E-2 5.9336364140378114E-2 6.5124948379968073E-2

LOW
TATO 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 1.6900277307595346 1.5641258220220933 1.4755552836076609 1.4306923193455536 1.4485593044303986 1.4961113263208081 1.5465927876079104 1.6319503849443968 1.7665189933075691 1.889400626879038 1.8895896303185307 1.944376753279873 2.066448359800626 1.8278736287400876 1.9171284904247352

LOW
ROA 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 0.11182338747434005 9.0997440798211787E-2 6.7154133268065838E-2 5.4022117860930162E-2 5.9645686815632509E-2 5.4799010697577401E-2 5.9970611645135619E-2 6.9839912012709268E-2 8.4770792094762321E-2 8.1430307682466577E-2 8.9891885607998143E-2 9.7673627837125618E-2 6.7056914338704074E-2 0.10845937523751616 0.124852893976677

LOW
EM 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 1.7657869634340222 1.9175673996769784 1.810357241761285 1.7308196549373329 1.8605896643109541 2.0298191495796285 2.3573645089124629 2.7614949801737958 3.1929173354735152 4.0849229161222889 5.3478396021137709 6.0090243487144557 9.4698133918770591 20.015720081135903 32.522616562282536

LOW
ROE 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 0.19745627980922098 0.17449372592868675 0.12157297147604541 9.3502543395039078E-2 0.11097614840989399 0.11123208129196152 0.14137259147001516 0.19286256643887623 0.27066613162118786 0.33263652991899662 0.4807273857631334 0.58692320790056185 0.63501646542261259 2.170892494929006 4.0605427974947812

LOW
Inventory turnover 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 4.3013717805151179 4.1461043226908423 3.8651480082835912 3.728573160383077 3.8051916836918638 3.9327348892878518 3.8597674418604653 3.8283116029363429 4.1145774884973632 4.0710509621484459 4.0689424364123159 3.9682261037479152 3.8532760130562855 3.7335913195234842 3.7068486383005004

Du Pont Analysis

Profit margin 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 6.6166599185969704E-2 5.8177826564215149E-2 4.5511092680904003E-2 3.7759423972892843E-2 4.1175868073338111E-2 3.6627629063097515E-2 3.877595455355199E-2 4.2795364771514688E-2 4.798747843409281E-2 4.30984866438704E-2 4.7572173431564051E-2 5.023390023171425E-2 3.2450321838758081E-2 5.9336364140378114E-2 6.5124948379968073E-2 ROA 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 0.11182338747434005 9.0997440798211787E-2 6.7154133268065838E-2 5.4022117860930162E-2 5.9645686815632509E-2 5.4799010697577401E-2 5.9970611645135619E-2 6.9839912012709268E-2 8.4770792094762321E-2 8.1430307682466577E-2 8.9891885607998143E-2 9.7673627837125618E-2 6.7056914338704074E-2 0.10845937523751616 0.124852893976677 ROE 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 0.19745627980922098 0.17449372592868675 0.12157297147604541 9.3502543395039078E-2 0.11097614840989399 0.11123208129196152 0.14137259147001516 0.19286256643887623 0.27066613162118786 0.33263652991899662 0.4807273857631334 0.58692320790056185 0.63501646542261259 2.170892494929006 4.0605427974947812 TATO 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43 861 44225 1.6900277307595346 1.5641258220220933 1.4755552836076609 1.4306923193455536 1.4485593044303986 1.4961113263208081 1.5465927876079104 1.6319503849443968 1.7665189933075691 1.889400626879038 1.8895896303185307 1.944376753279873 2.066448359800626 1.8278736287400876 1.9171284904247352 EM 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 1.7657869634340222 1.9175673996769784 1.810357241761285 1.7308196549373329 1.8605896643109541 2.0298191495796285 2.3573645089124629 2.7614949801737958 3.1929173354735152 4.0849229161222889 5.3478396021137709 6.0090243487144557 9.4698133918770591 20.015720081135903 32.522616562282536

Growth

Total Assets 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 0.11171534555407492 5.8861641128640452E-2 9.7595300740378477E-3 2.1027117103469273E-2 -4.1544259473574874E-3 -2.6609851306653942E-2 2.0204493969264714E-3 -2.7648784064523979E-2 -1.7626543500801173E-2 0.10049254781551853 2.5662636596140542E-2 -2.2186959848119914E-2 0.14382172249913072 0.18403384763497255

Growth
Total Equity 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 2.3720190779014327E-2 0.12156789663312217 5.6161728053170767E-2 -5.0186166028632906E-2 -8.7179770318021155E-2 -0.16185810197786243 -0.14462004762935698 -0.15903146882645747 -0.2321428571428571 -0.15939378102952706 -8.7193036990985351E-2 -0.37953345819853568 -0.45883644346871566 -0.27129817444219062

Growth
Total Revenue 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 2.8895944765273684E-2 -1.097694840834218E-3 -2.0941322828115227E-2 3.377806014400675E-2 2.8536310560278499E-2 6.234066284257489E-3 5.7322697492131924E-2 5.2530093415953827E-2 5.0708784661081863E-2 0.10060263398449409 5.5400895150499174E-2 3.9201970299771238E-2 1.176569577472697E-2 0.24185008593446811

LOW
Total Equity 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 15725000 16098000 18055000 19069000 18112000 16533000 13857000 11853000 9968000 7654000 6434000 5873000 3644000 1972000 1437000

Growth
Operating Income 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 -8.6762422360248448E-2 -0.19532412327311366 -0.17802430005282621 0.14395886889460163 -7.9494382022471943E-2 8.6359475129691887E-2 0.16544943820224711 0.15497710291636535 3.7353923205342143E-2 0.17602092134379399 0.12658227848101267 -0.38991800789553599 0.5714285714285714 0.52787456445993031

Growth
Shares Outstanding 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 -4.3620859298130532E-2 8.2304526748970819E-3 -7.4829931972789643E-3 -7.1967100753941082E-2 -8.3456425406203794E-2 –

0.1055

6003223207089 -7.2072072072072113E-2 -6.7961165048543659E-2 -5.208333333333337E-2 -4.8351648351648402E-2 -4.1570438799076181E-2 -3.4939759036144546E-2 -4.7440699126092389E-2 -4.1939711664482293E-2

Growth
Net Income 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 -9.5330112721417115E-2 -0.21858312566749738 -0.18769931662870154 0.12731351654514866 -8.5074626865671688E-2 6.5252854812398065E-2 0.16692189892802456 0.18022747156605434 -5.633802816901412E-2 0.21484681853888454 0.11445198836081483 -0.32869161589788221 0.85004321521175452 0.36299929922915197

Growth
EPS Net Diluted 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 -6.5326633165829096E-2 -0.19892473118279574 -0.18791946308724838 0.17355371900826433 7.0422535211267512E-3 0.18181818181818188 0.26627218934911245 0.26635514018691575 7.3800738007379074E-3 0.27106227106227121 0.17867435158501421 -0.30562347188264061 0.93309859154929597 0.41165755919854274

Growth
Cash dividends per share 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 0.61111111111111116 0.15517241379310365 5.9701492537313383E-2 0.18309859154929575 0.26190476190476208 0.16981132075471694 0.12903225806451601 0.24285714285714288 0.22988505747126453 0.2429906542056075 0.18796992481203012 0.17088607594936711 0.15135135135135114 7.9812206572769995E-2

Growth
Number of full time employees 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 1.9108280254777066E-2 2.4999999999999911E-2 1.2195121951219523E-2 -3.0120481927710885E-2 0 -6.2111801242236142E-3 4.3749999999999956E-2 4.7904191616766401E-2 2.857142857142847E-2 5.555555555555558E-2 5.2631578947368363E-2 -5.0000000000000044E-2 5.2631578947368363E-2 0.10000000000000009

Profitability analysis

Gross Profit %TR 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 34.517000000000003 34.643999999999998 34.213000000000001 34.863999999999997 35.137 34.555999999999997 34.296999999999997 34.588000000000001 34.786000000000001 34.820999999999998 34.551000000000002 34.113999999999997 32.125 31.8 33.006 Operating Income %TR 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 10.978999999999999 9.7449999999999992 7.85 6.59 7.2930000000000001 6.5270000000000001 7.0469999999999997 7.7670000000000003 8.5229999999999997 8.4149999999999991 8.9909999999999997 9.5980000000000008 5.6349999999999998 8.7509999999999994 10.766999999999999 Net Income %TR 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 6.617 5.8179999999999996 4.5510000000000002 3.7759999999999998 4.1180000000000003 3.6629999999999998 3.8780000000000001 4.28 4.7990000000000004 4.3099999999999996 4.7569999999999997 5.0229999999999997 3.2450000000000001 5.9340000000000002 6.5119999999999996

LOW
Gross Profit %TR 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 34.517000000000003 34.643999999999998 34.213000000000001 34.863999999999997 35.137 34.555999999999997 34.296999999999997 34.588000000000001 34.786000000000001 34.820999999999998 34.551000000000002 34.113999999999997 32.125 31.8 33.006

LOW
Operating Income %TR 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 10.978999999999999 9.7449999999999992 7.85 6.59 7.2930000000000001 6.5270000000000001 7.0469999999999997 7.7670000000000003 8.5229999999999997 8.4149999999999991 8.9909999999999997 9.5980000000000008 5.6349999999999998 8.7509999999999994 10.766999999999999

LOW
Net Income %TR 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 6.617 5.8179999999999996 4.5510000000000002 3.7759999999999998 4.1180000000000003 3.6629999999999998 3.8780000000000001 4.28 4.7990000000000004 4.3099999999999996 4.7569999999999997 5.0229999999999997 3.2450000000000001 5.9340000000000002 6.5119999999999996

LOW
Total Revenue 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 46927000 48283000 48230000 47220000 48815000 50208000 50521000 53417000 56223000 59074000 65017000 68619000 71309000 72148000 89597000

Growth
Cash Flow from Operations 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 -3.4429142603287444E-2 -5.1759834368530044E-2 -1.6496846191169312E-2 -4.9827331031080391E-2 0.12902388369678097 -0.13497355713957226 9.2769803296119058E-2 0.19897835076623682 -2.9417731791438473E-2 0.17412207357859533 -9.8273099519316398E-2 0.22270483711747291 -0.30631357984821572 1.571927374301676

LOW
Cash Flow from Operations 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 4502000 4347000 4122000 4054000 3852000 4349000 3762000 4111000 4929000 4784000 5617000 5065000 6193000 4296000 11049000

LOW
Operating Income 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 5152000 4705000 3786000 3112000 3560000 3277000 3560000 4149000 4792000 4971000 5846000 6586000 4018000 6314000 9647000

LOW
Net Income 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 3105000 2809000 2195000 1783000 2010000 1839000 1959000 2286000 2698000 2546000 3093000 3447000 2314000 4281000 5835000

LOW
Shares Outstanding 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 1524500 1458000 1470000 1459000 1354000 1241000 1110000 1030000 960000 910000 866000 830000 801000 763000 731000

LOW
EPS Net Diluted 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 1.99 1.86 1.49 1.21 1.42 1.43 1.69 2.14 2.71 2.73 3.47 4.09 2.84 5.49 7.75

LOW
Cash dividends per share 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 0.18 0.28999999999999998 0.33500000000000002 0.35499999999999998 0.42 0.53 0.62 0.7 0.87 1.07 1.33 1.58 1.85 2.13 2.2999999999999998

LOW
Number of full time employees 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 157000 160000 164000 166000 161000 161000 160000 167000 175000 180000 190000 200000 190000 200000 220000 Number of full time employees 39115 39479 39843 40207 40571 40942 41306 41670 42034 42398 42769 43133 43497 43861 44225 157000 160000 164000 166000 161000 161000 160000 167000 175000 180000 190000 200000 190000 200000 220000

Cost of debt

Cost of debt, historical costs

1/29/21 1/31/20 2/1/19 2/2/18 2/3/17
Total long-term debt 21780000 17365000 15501000 15858000 15189000
Cash paid for interest, net of amount capitalized 824000 671000 635000 654000 619000
Implied interest rate 3.8% 3.9% 4.1% 4.1% 4.1%

https://www.moodys.com/credit-ratings/McDonalds-Corporation-credit-rating-479500

https://www.standardandpoors.com/en_US/web/guest/ratings/entity/-/org-details/sectorCode/CORP/entityId/101460

10 year bonds 3.038 3.065 Average

3.0515 RD 3.05% Lower than the historical cost of debt.

http://finra-markets.morningstar.com/BondCenter/Results.jsp

https://www.moodys.com/credit-ratings/McDonalds-Corporation-credit-rating-479500
https://www.standardandpoors.com/en_US/web/guest/ratings/entity/-/org-details/sectorCode/CORP/entityId/101460
http://finra-markets.morningstar.com/BondCenter/Results.jsp

Cost of equity

DCF approach Growth of dividends

Recent growth Last year Last 2 years Last 3 years Last 5 years Last 7 years Last 10 years
Cash dividends per share 8.0% 11.5% 13.3% 11.6% 18.5% 18.5%

Historical payout ratio
1/29/21 1/31/20 2/1/19 2/2/18 2/3/17 1/29/16
Net Income 5835000 4281000 2314000 3447000 3093000 2546000
Payment of Dividends -1704000 -1618000 -1455000 -1288000 -1121000 -957000
Payout ratio 29.2% 37.8% 62.9% 37.4% 36.2% 37.6%

ROE 406.1% 217.1% 63.5% 58.7% 48.1% 33.3%

https://finance.yahoo.com/quote/LOW?p=LOW Sustainable growth

287.5% 135.0% 23.6% 36.8%

30.6%

20.8% Last 5 years average 25.7% https://finance.yahoo.com/quote/LOW?p=LOW
Three estimates of g Analysts earnings estimate 16.80% My estimate based on historical growth 8.00% Sustainable growth

26% Average

16.84%

http://finra-markets.morningstar.com/BondCenter/Default.jsp

Dividend yield 1.42% Rs 18.26% CAPM approach Average beta

estimate 1.312 Market

Risk Premium 5.

50% Given by instructor based on market expectations Risk free rate 1.93% Rs

9.14% Rd

plus risk premium approach Rd 3.05%
Risk Premium 4%

Given by instructor based on historical averages Rs

7.05%

http://finra-markets.morningstar.com/BondCenter/Default.jsp
https://finance.yahoo.com/quote/LOW?p=LOW

CAPM & beta

Date Open

High

Low

Close Adj Close Volume ^GSPC

LOW Date Open High Low Close Adj Close Volume
1/1/17 2,251.57 2,300.99 2,245.13 2,278.87

2,278.87

70,483,180,000 Ret S&P Ret LOW

1/1/17

71.709999 74.75 70.489998 73.080002 66.602631 104191300 2/1/17 2,285.59 2,371.54 2,271.65 2,363.64

2,363.64

69,162,420,000 0.0371982605 0.0226

397363

2/1/17

72.910004 77.519997 71.790001 74.370003 68.110497 106682500 3/1/17 2,380.13 2,400.98 2,322.25 2,362.72

2,362.72

81,547,770,000 -0.0003892302 0.1054188461

3/1/17

81.279999

80.279999 82.209999 75.290627 128273700 3/31/17 2,362.34 2,398.16 2,328.95 2,384.20

2,384.20

65,265,670,000 0.0090912169 0.0324776947 4/1/17 83.110001 85.760002 81.050003 84.879997 77.735893 81098100 4/30/17 2,388.50 2,418.71 2,352.72 2,411.80

2,411.80

79,607,170,000 0.01157621 -0.0680762618 5/1/17 84.839996 86.25 78.099998 78.769997 72.443924 136012800 5/31/17 2,415.65 2,453.82 2,405.70 2,423.41

2,423.41

81,002,490,000 0.0048

13832 -0.0157422036 6/1/17

78.769997

81.449997 75.790001 77.529999 71.303497 131718300 6/30/17 2,431.39 2,484.04 2,407.70 2,470.30

2,470.30

63,169,400,000 0.0193487689 -0.0016765657 7/1/17

78.449997 71.580002 77.400002 71.183952 122500900 7/31/17 2,477.10 2,490.87 2,417.35 2,471.65

2,471.65

70,616,030,000 0.0005464923 –

0.0400

182193 8/1/17 77.269997 78.910004 70.760002 73.889999 68.335297 149943300 8/31/17 2,474.42 2,519.44 2,446.55 2,519.36

2,519.36

66,337,

980,000 0.0193028948 0.0818782715 9/1/17 74.190002 80.150002 73.720001 79.940002 73.930473 145099700 9/30/17 2,521.20 2,582.98 2,520.40 2,575.26

2,575.26

70,871,570,000 0.0221881748 0.0001249823 10/1/17 80.040001 82.739998 79.400002 79.949997 73.939713 110493800 10/31/17 2,583.21 2,657.74 2,557.45 2,647.58

2,647.58

73,173,260,000 0.0280826014 0.0481208792 11/1/17 79.620003 84.68 75.360001 83.370003 77.497757 142241900 12/1/17 2,645.10 2,694.97 2,605.52 2,673.61

2,673.61

65,251,190,000 0.0098316198 0.1147894771

12/1/17

83.239998 93.550003 82.120003 92.940002 86.393684 131002100 1/1/18 2,683.73 2,872.87 2,682.36 2,823.81

2,823.81

76,860,120,000 0.0561787246 0.1268563452

1/1/18

93.019997 108.980003 91.169998 104.730003 97.353271 128537300 2/1/18 2,816.45 2,835.96 2,532.69 2,713.83

2,713.83

79,579,410,000 -0.0389473796 -0.1412751812

2/1/18

103.839996 105.080002 86.75 89.589996 83.59967 151269400 3/1/18 2,715.22 2,801.90 2,585.89 2,640.87

2,640.87

76,369,800,000 -0.0268845138 -0.0205382988

3/1/18

89.57 90.330002 83.739998 87.75 81.882675 170855700 3/31/18 2,633.45 2,717.49 2,553.80 2,648.05

2,648.05

69,648,590,000 0.002718801 -0.0606265489 4/1/18 87.349998 89.150002 81.309998 82.43 76.918411 132443800 4/30/18 2,642.96 2,742.24 2,594.62 2,705.27

2,705.27

75,617,280,000 0.0216083533 0.1582443766 5/1/18 81.75 97.980003 81.160004 95.010002 89.090317 143773800 5/31/18 2,718.70 2,791.47 2,691.99 2,718.37

2,718.37

77,439,710,000 0.0048424002 0.0058939402 6/1/18 95.440002 101.330002 95.160004 95.57 89.61541 91697700 6/30/18 2,704.95 2,848.03 2,698.95 2,816.29

2,816.29

64,542,170,000 0.0360215865 0.0394474008 7/1/18 95.360001 101.980003 93.959999 99.339996 93.150505 76344400 7/31/18 2,821.17 2,916.50 2,796.34 2,901.52

2,901.52

69,238,220,000 0.0302632186 0.0999445253 8/1/18 98.989998 109.800003 96.239998 108.75 102.460388 107517700 8/31/18 2,896.96 2,940.91 2,864.12 2,913.98

2,913.98

62,492,080,000 0.0042943009 0.055816195 9/1/18 108.389999 117.699997 108.029999 114.82 108.179337 94437200 9/30/18 2,926.29 2,939.86 2,603.54 2,711.74

2,711.74

91,327,930,000 -0.069403359 -0.1707020907 10/1/18 115.580002 115.629997 91.610001 95.220001 89.712898 117775300 10/31/18 2,717.58 2,815.15 2,631.09 2,760.17

2,760.17

80,080,110,000 0.0178593818 -0.0040679101 11/1/18 95.290001 100.690002 84.75 94.370003 89.347954 114556600 12/1/18 2,790.50 2,800.18 2,346.58 2,506.85

2,506.85

83,522,570,000 -0.0917769558 –

0.0212

991783

12/1/18

95.489998 96.059998 85.900002 92.360001 87.444916 106725000 1/1/19 2,476.96 2,708.95 2,443.96 2,704.10

2,704.10

80,401,630,000 0.0786844047 0.0411431924

1/1/19

91.220001 98.220001 90.230003 96.160004 91.042679 98822400 2/1/19

2,702.32 2,813.49 2,681.83 2,784.49

2,784.49

70,183,430,000 0.0297289301 0.098417216

2/1/19

96.209999 109.919998 95.839996 105.089996 100.002846 88244000 3/1/19 2,798.22 2,860.31 2,722.27 2,834.40

2,834.40

78,596,280,000 0.0179242878 0.0416785038

3/1/19

105.900002 109.940002 97.550003 109.470001 104.170815 99741000 3/31/19 2,848.63 2,949.52

2,848.63

2,945.83

69,604,840,000 0.0393134349 0.0335251961 4/1/19 110.209999 118.230003 105.839996 113.139999 107.663162 86340500 4/30/19 2,952.33 2,954.13 2,750.52 2,752.06

2,752.06 76,860,120,000

-0.0657777265 -0.1720310611 5/1/19 113.040001 113.129997 91.599998 93.279999 89.141754 132427600 5/31/19 2,751.53 2,964.15 2,728.81 2,941.76

2,941.76

70,904,280,000 0.0689301832 0.0817968199 6/1/19 93.029999 102.959999 9

2.90

0002 100.910004 96.433266 95671900 6/30/19 2,971.41 3,027.98 2,952.22 2,980.38

2,980.38

70,349,470,000 0.0131281954 0.0048558866 7/1/19 102.099998 108.309998 100.839996 101.400002 96.901535 92408500 7/31/19 2,980.32 3,013.59 2,822.12 2,926.46

2,926.46

79,599,440,000 -0.0180916527 0.1124754113 8/1/19 101.739998 113.239998 91.82 112.199997 107.800575 125947700 8/31/19 2,909.01 3,021.99 2,891.85 2,976.74

2,976.74

73,992,330,000 0.0171811677 -0.0199643462 9/1/19 111.370003 115.959999 108.809998 109.959999 105.648407 74933600 9/30/19 2,983.69 3,050.10 2,855.94 3,037.56

3,037.56

77,564,550,000 0.0204317475 0.0150054037 10/1/19 110.089996 113.809998 104.589996 111.610001 107.233704 75839900 10/31/19 3,050.72 3,154.26

3,050.72

3,140.98

72,179,920,000 0.0340470641 0.0562599796 11/1/19 111.919998 121.220001 110.150002 117.309998 113.26667 86957200 12/1/19 3,143.85 3,247.93 3,070.33 3,230.78

3,230.78

72,054,000,000 0.0285898032 0.0208847581

12/1/19

117.599998 121.459999 113.610001 119.760002 115.632217 66612000 1/1/20 3,244.67 3,337.77 3,214.64 3,225.52

3,225.52

77,104,420,000 -0.0016280898 -0.0293921633

1/1/20

120.050003 123.139999 116.089996 116.239998 112.233536 76244300 2/1/20 3,235.66 3,393.52 2,855.84 2,954.22

2,954.22

84,292,270,000 -0.084110469 -0.0790502849

2/1/20 117

126.730003 102.93 106.57 103.361443 87816100 3/1/20 2,974.28 3,136.72 2,191.86 2,584.59

2,584.59

161,80

1,100

,000 -0.1251193208 -0.1925495467

3/1/20

107.199997 113.550003

86.050003 83.459244 202085300 3/31/20 2,498.08 2,954.86 2,447.49 2,912.43

2,912.43

123,163,450,000 0.1268441029 0.2173155678 4/1/20 80.739998 107.800003 79.080002 104.75 101.596237 132098400 4/30/20 2,869.09 3,068.67 2,766.64 3,044.31

3,044.31

106,799,100,000 0.045281775 0.2516277251 5/1/20 102.5 131.399994 102.309998 130.350006 127.160667 134518500 5/31/20 3,038.78 3,233.13 2,965.66 3,100.29

3,100.29

131,044,000,000 0.0183884033 0.0365937291 6/1/20 129.889999 137.289993 123.089996 135.119995 131.81395 108753500 6/30/20 3,105.92 3,279.99 3,101.17 3,271.12

3,271.12

97,197,020,000 0.055101297 0.1020576426 7/1/20 135.399994 149.919998 134.050003 148.910004 145.266571 77540100 7/31/20 3,288.26 3,514.77 3,284.53 3,500.31

3,500.31

84,402,300,000 0.0700646873 0.1102074613 8/1/20 149.899994 171.320007 148.710007 164.690002 161.276031 84474800 8/31/20 3,507.44 3,588.11 3,209.45 3,363.00

3,363.00

92,084,120,000 -0.0392279541 0.0071041059 9/1/20 164.410004 17

1.72

0001 151.889999 165.860001 162.421753 86104100 9/30/20 3,385.87 3,549.85 3,233.94 3,269.96

3,269.96

89,737,600,000 -0.0276657746 -0.0467863501 10/1/20 167.339996 180.669998 155.770004 158.10

0006 154.822632 76284400 10/31/20 3,296.20 3,645.99 3,279.74 3,621.63

3,621.63

100,977,880,000 0.1075456581 -0.0110330187 11/1/20 159.889999 173.559998 146.720001 155.820007 153.114471 119732000 12/1/20 3,645.87 3,760.20 3,633.40 3,756.07

3,756.07

96,056,410,000 0.0371214067 0.0300

986312

12/1/20 155.820007

166.190002 149.309998 160.509995 157.723007 112753000 1/1/21 3,764.61 3,870.90 3,662.71 3,714.24

3,714.24

105,548,790,000 -0.0111366402 0.0394993103

1/1/21

160.770004 175.149994 157.130005 166.85

0006 163.952957 81117500 2/1/21 3,731.17 3,950.43 3,725.62 3,811.15

3,811.15

98,596,960,000 0.026091475 -0.0391886436

2/1/21

167.119995 179.460007 157.949997 159.75 157.527863 71474000 3/1/21 3,842.51 3,994.41 3,723.34 3,972.89

3,972.89

120,863,560,000 0.042438634 0.1904852159

3/1/21

160.759995 192.910004 150.839996 190.179993 187.534592 102104800 3/31/21 3,992.78 4,218.78

3,992.78

4,181.17

82,869,290,000 0.0524253126 0.0319171249 4/1/21 191.199997 208.979996 189.690002 196.25 193.520157 75171000 4/30/21 4,191.98 4,238.04 4,056.88 4,204.11

4,204.11

75,155,370,000 0.0054865026 –

0.0043

073394 5/1/21 198.75 215.220001 186.380005 194.830002 192.6866 89800200 5/31/21 4,216.52 4,302.43 4,164.40 4,297.50

4,297.50

85,705,180,000 0.0222139763 -0.0044141938 6/1/21

195

196.100006 184.460007 193.970001 191.836044 84601100 6/30/21 4,300.73 4,429.97 4,233.13 4,395.26

4,395.26

66,496,430,000 0.0227481094 -0.006598859 7/1/21 194.5 201.419998 190.039993 192.690002 190.570145 66190800 7/31/21 4,406.86 4,537.36 4,367.73 4,522.68

4,522.68

63,217,960,000 0.0289903214 0.0625309594 8/1/21 193.809998 209.490005 182.080002 203.889999 202.486679 92307400 8/31/21 4,528.80 4,545.85 4,305.91 4,307.54

4,307.54

66,268,850,000 -0.0475691404 -0.0050517842 9/1/21 204.550003 212.25 201.479996 202.860001 201.46376 64883400 9/30/21 4,317.16 4,608.08 4,278.94 4,605.38

4,605.38

61,874,700,000 0.0691438733 0.1526176122 10/1/21 203.729996 234.960007 201.580002 233.820007 232.210678 63762400 10/31/21 4,610.62 4,743.83 4,560.00 4,567.00

4,567.00

67,520,800,000 -0.0083337314 0.0498487369 11/1/21

235

256.390015 230.210007 244.589996 243.786087 67133800 12/1/21 4,602.82 4,808.93 4,495.12 4,766.18

4,766.18

68,699,830,000 0.043612875 0.0567889053

12/1/21

248.300003 263.309998 242.300003 258.480011 257.630432 75574600 1/1/22 4,778.14 4,818.62 4,222.62 4,515.55

4,515.55

73,279,440,000 -0.0525850891 -0.0817471245

1/1/22

259.200012 260.829987 220.199997 237.350006 236.569885 84261400 Monthly Average

1.2% 2.5%
Monthly SD

4.5% 8.7%
S&P 500

LOW
Yearly average return 15.0% 30.0% Yearly Standard

Deviation 15.7%

30.0%
Beta

1 1.312
CORREL 0.682 SLOPE 1.307 Long formula for beta 1.307
Average beta estimate

https://finance.yahoo.com/quote/mcd/?p=mcd

Using 5 years of data

1.307
Yahoo (3 years)

1.3
MSN Money

1.32
Reuters

1.32
Average beta 1.312

https://www.reuters.com/finance/stocks/financial-highlights/MCD.N

https://www.msn.com/en-us/money/stockdetails/nys-mcd/fi-a1xdec?symbol=MCD&form=PRFIHQ

Ret LOW

3.7198260541408734E-2 -3.8923017041514463E-4 9.0912169025529899E-3 1.1576210049492719E-2 4.8138319927024664E-3 1.9348768883515444E-2 5.4649232886694321E-4 1.9302894827342154E-2 2.2188174774546043E-2 2.8082601368405458E-2 9.8316198188534987E-3 5.6178724645703726E-2 -3.8947379604151844E-2 -2.6884513768364315E-2 2.718801001185378E-3 2.1608353316591389E-2 4.8424002040461378E-3 3.6021586465418753E-2 3.0263218631604083E-2 4.2943009181395375E-3 -6.9403358979814644E-2 1.785938179914015E-2 -9.1776955767217339E-2 7.8684404731036883E-2 2.9728930143116061E-2 1.7924287751078349E-2 3.9313434942139347E-2 -6.5777726481161536E-2 6.8930183208214979E-2 1.3128195366039375E-2 -1.8091652742267761E-2 1.7181167690656807E-2 2.0431747482144935E-2 3.404706409091518E-2 2.8589803182446305E-2 -1.6280898111292741E-3 -8.4110469009648137E-2 -0.12511932083595656 0.12684410293315374 4.528177501261843E-2 1.8388403283502663E-2 5.5101296975444303E-2 7.0064687324219221E-2 -3.9227954095494399E-2 -2.7665774606006499E-2 0.10754565805086314 3.712140665943231E-2 -1.1136640158463607E-2 2.6091474971999817E-2 4.2438634008107767E-2 5.242531255584737E-2 5.4865025818131574E-3 2.221397632316946E-2 2.274810936591054E-2 2.8990321391681118E-2 -4.7569140421166334E-2 6.9143873301234615E-2 -8.3337314184714906E-3 4.3612874972629889E-2 -5.2585089106999772E-2 2.2639736259067567E-2 0.10541884608476737 3.2477694733502593E-2 -6.8076261759802636E-2 -1.574220358356071E-2 -1.6765657370211295E-3 -4.0018219275041234E-2 8.1878271488305732E-2 1.2498229248425474E-4 4.812087923576347E-2 0.11478947706834908 0.12685634519301225 -0.14127518119036808 -2.0538298775581221E-2 -6.0626548900606925E-2 0.15824437662915303 5.8939401910536038E-3 3.9447400843225511E-2 9.9944525260491135E-2 5.5816195035295113E-2 -0.17070209073290965 -4.0679100568125071E-3 -2.129917826657779E-2 4.1143192361234648E-2 9.8417215952091963E-2 4.1678503829780889E-2 3.3525196092590859E-2 -0.17203106109775967 8.1796819927954179E-2 4.8558865568235632E-3 0.11247541125122518 -1.996434620130727E-2 1.5005403725585786E-2 5.6259 979604919685E-2 2.088475806695822E-2 -2.9392163258445514E-2 -7.9050284934442439E-2 -0.19254954673959024 0.21731556782373929 0.25162772514891474 3.6593729097064376E-2 0.10205764260914707 0.11020746128852998 7.1041058791929679E-3 -4.6786350101762575E-2 -1.10330187385006E-2 3.0098631239107387E-2 3.9499310332068438E-2 -3.9188643605860718E-2 0.19048521593922718 3.191712492167853E-2 -4.3073394158108513E-3 -4.4141938256215818E-3 -6.5988589714662815E-3 6.2530959400802333E-2 -5.051784171935636E-3 0.1526176122196865 4.9848736930176774E-2 5.6788905266771827E-2 -8.174712450119237E-2

https://www.reuters.com/finance/stocks/financial-highlights/MCD.N
https://finance.yahoo.com/quote/mcd/?p=mcd
https://www.msn.com/en-us/money/stockdetails/nys-mcd/fi-a1xdec?symbol=MCD&form=PRFIHQ

WACC

Tax rate 1/29/21 1/31/20 2/1/19 2/2/18 2/3/17 1/29/16 1/30/15 1/31/14 2/1/13 2/3/12
Taxation 1904000 1342000 1080000 2042000 2108000 1873000 1578000 1387000 1178000 1067000
Earnings Before Tax 7739000 5623000 3394000 5489000 5201000 4419000 4276000 3673000 3137000 2906000
Implied rate 24.6% 23.9% 31.8% 37.2% 40.5% 42.4% 36.9% 37.8% 37.6% 36.7%
Average tax rate last 5 years

24.2%
Capital structure
Base

d on book value of firm 1/29/21 1/31/20 2/1/19 2/2/18 2/3/17 1/29/16 1/30/15 1/31/14 2/1/13 2/3/12
Total long-term debt 21780000 17365000 15501000 15858000 15189000 12606000 11367000 10135000 9077000 7627000
Total Equity 1437000 1972000 3644000 5873000 6434000 7654000 9968000 11853000 13857000 16533000
Value of firm (V) 23217000 19337000 19145000 21731000 21623000 20260000 21335000 21988000 22934000 24160000
D/V

0.9381056984 0.8980193412

81.0% 73.0% 70.2% 62.2% 53.3% 46.1% 39.6% 31.6%
E/V

0.0618943016 0.1019806588

19.0% 27.0% 29.8% 37.8% 46.7% 53.9% 60.4% 68.4%
Average for last 5 years D/V

81.6% E/V 18.4%
Weighted Average Cost of Capital

Capital structure

Based on market value of firm Tc

24.2%
Rd 3.05%
Calculating historical market equity 1) DCF Rs

18.26%
1/29/21 1/31/20 2/1/19 2/2/18

2) CAPM

9.14%
Total long-term debt 21780000 17365000 15501000 15858000

3) Rd + RP

7.05%
Shares Outstanding 731000 763000 801000 830000

Avg Rs 11.48% Stock price

end of year

166.85 106.57

105.09 89.59 Market capitalization (E ) 121967354 81312910 84177087 74359697 Calculating capital structure with book values Value of the firm (V) 143747354 98677910 99678087 90217697 D/V 81.6%
D/V 15.2% 17.6%

15.6%

17.6% E/V 18.4%
E/V

84.8% 82.4% 84.4%

82.4%
Average for last 4 years Estimate of WACC 4.00% D/V 16.5%
E/V

83.5% Calculating capital structure with market values Market capitalization at the close of the most recent fiscal year D/V 20.8%
Based on market value of firm

Oct-21 E/V

79.2% Debt at the close of the fiscal year 28017 Stock price at close of fiscal year

158.10 Estimate of WACC

9.57% Shares outstanding, most recent

674
Market capitalization (E )

106519.8790425 Value of the firm (V)

134536.8790425

https://finance.yahoo.com/quote/LOW/key-statistics?p=LOW

D/V 20.8%
E/V 79.2%

https://finance.yahoo.com/quote/LOW/balance-sheet?p=LOW

https://finance.yahoo.com/quote/LOW/key-statistics?p=LOW
https://finance.yahoo.com/quote/LOW/balance-sheet?p=LOW

Cap Bud

Capital Budgeting template Must be adjusted to fit the instructions of MP3 Your companyhas developed a powerful new server that would be used for corporations’ Internet activities. It would cost $10 million at Year 0 to buy the equipment necessary to manufacture the server. The project would require net working capital at the beginning of each year in an amount equal to 10% of the year’s projected sales; for example, NWC0 = 10%(Sales1). The servers would sell for

$24,000

per unit, and analysts believes that variable costs would amount to

$17,500

per unit. After Year 1, the sales price and variable costs will increase at the inflation rate of 3%. The company’s nonvariable costs would be $1 million at Year 1 and would increase with inflation. The server project would have a life of 4 years. If the project is undertaken, it must be continued for the entire 4 years. Also, the project’s returns are expected to be highly correlated with returns on the firm’s other assets. The firm believes it could sell

1,000

units per year. The equipment would be depreciated over a 5-year period, using MACRS rates. The estimated market value of the equipment at the end of the project’s 4-year life is

$50

0,000

. Company’s federal-plus-state tax rate is

40%

. Its cost of capital is 10% for average-risk projects, defined as projects with a coefficient of variation of

NPV

between 0.8 and 1.2. Low-risk projects are evaluated with a WACC of 8%, and high-risk projects at 13%. a. Develop a spreadsheet model, and use it to find the project’s NPV,

IRR

, and payback. Key Output: NPV = $

5,141,686 Part 1. Input Data IRR = 21.1% MIRR

15.5%
Equipment cost $

10,000,000 Net WC/Sales

10%

Market value of equipment at Year 4

$500,000
First year sales (in units)

1,000 Tax rate 40%
Sales price

per unit

$24,000 WACC

5.91% Variable

cost per unit

$17,500

Inflation

3.0%
Nonvariable

costs $

1,000,000 Part 2. Depreciation and Amortization Schedule Years Accum’d Year

Initial Cost

1 2 3 4

Depr’n Equipment Depr’n Rate 20.0% 32.0%

19.0%

12.0% Equipment Depr’n, Dollars $

2,000,000 $

3,200,000 $

1,900,000 $

1,200,000 $8

,300,000 Ending Bk Val: Cost – Accum Dep’rn

10,000,000

1,700,000 Part 3. Net Salvage Values, in Year 4

Equipment
Estimated Market Value in Year 4

$500,000
Book Value in Year 4

1,700,000
Expected Gain or Loss -1,200,000 Taxes paid or tax credit -480,000 Net cash flow from salvage $980,000 Part 4.

Projected

Net Cash Flows (Time line of Annual Cash Flows) Years 0 1 2 3 4
Investment Outlays at Time Zero: Equipment

($10,000,000) Operating Cash Flows over the Project’s Life: Units

sold

1,000 1,000 1,000 1,000
Sales price

$24,000.00 $24,720.00 $25,461.60 $26,225.45 Variable costs $17,500.00 $18,025.00 $18,565.75 $19,122.72 Sales revenue $24,000,000 $24,720,000 $25,461,600 $26,225,448 Variable costs

17,500,000 18,025,000 18,565,750 19,122,723 Nonvariable operating costs

1,000,000

1,030,000 1,060,900 1,092,727 Depreciation (equipment)

2,000,000 3,200,000 1,900,000 1,200,000
Oper. income before taxes (EBIT) $3,500,000 $2,465,000 $3,934,950 $4,809,999 Taxes on operating income (40%) 1,400,000 986,000 1,573,980 1,923,999 After-tax operating income $2,100,000 $1,479,000 $2,360,970 $2,885,999 Add back depreciation

2,000,000 3,200,000 1,900,000 1,200,000

Operating cash flow $4,100,000 $4,679,000 $4,260,970 $4,085,999 Terminal Year Cash Flows: Required level of net working capital $2,400,000 $2,472,000 $2,546,160 $2,622,545 $0 Required investment in NWC ($2,400,000) ($72,000) ($74,160) ($76,385)

$2,622,545

Terminal Year Cash Flows:

Net salvage value

980,000
Net Cash Flow (Time line of cash flows) ($12,400,000) $

4,028,000 $

4,604,840 $

4,184,585 $

7,688,544 Part 5. Key Output: Appraisal of the Proposed Project Net Present Value (at 10%) $5,141,686 IRR

21.09% MIRR

15.50% PI formula must be entered Payback

(See calculation below)

2.90 3
Data for Payback Years

0 1 2 3 4
Net cash flow

(12,400,000)

4,028,000 4,604,840 4,184,585 7,688,544
Cumulative CF

(12,400,000)

(8,372,000) (3,767,160) 417,425 8,105,969 Part of year required for payback

1.00 1.00 0.90 0.00
b. Now conduct a sensitivity analysis to determine the sensitivity of NPV to changes in the sales price, variable costs
per unit, and number of units sold wacc and nonvariable costs. Set these variables’ values at 5% and 10% above and below their base-case
values. Include a graph in your analysis.

Part 6. Evaluating Risk:

Sensitivity Analysis

I. Sensitivity of NPV to Changes in Inputs. Here we use Excel “Data Tables” to find NPVs at different unit sales,
WACC, variable costs, sales price and nonvariable costs–changing one variable at a time, holding other things
constant. % Deviation 1st YEAR UNIT SALES

% Deviation WACC
from Units NPV from NPV
Base Case Sold

$5,141,686 Base Case WACC $5,141,686
-10%

900

3,779,741

-10% 5.3%
-5%

950

4,460,714

-5% 5.6%
0% 1,000 5,141,686 0% 5.9%
5%

1,050 5,822,658

5% 6.2%
10% 1,100

6,503,630

10% 6.5%
% Deviation

VARIABLE COST

% Deviation

SALES PRICE from Variable NPV from Sales NPV
Base Case Costs $5,141,686 Base Case Price $5,141,686
–

20% $14,000

-10%

$21,600 -10%

$15,750

-5%

$22,800 0% $17,500 0% $24,000
10%

$19,250

$25,200 20%

$21,000

10%

$26,400 Note about data tables. The data in the column input should NOT be input using a cell reference to the column input cell. For example, the base case number of units sold in Cell B102 should be the number 1000; you should NOT have the formula =D26 in that cell. This is because you’ll use D26 as the column input cell in the data table and if Excel tries to iteratively replace Cell D26 with the formula =D26 rather than a series of numbers, Excel will calculate the wrong answer. Unfortunately, Excel won’t tell you that there is a problem, so you’ll just get the wrong values for the data table! % Deviation

NONVARIABLE COST from

Fixed

NPV
Base Case Costs $5,141,686
-10%

$900,000 -5%

950,000 0% 1,000,000
5%

1,050,000 10%

1,100,000 Deviation

NPV at Different Deviations from Base from Sales Variable Nonvariable
Base Case Price

Cost/Unit Units Sold

Cost WACC
-10% $0 $0

$3,779,741

$0 $0
-5% 0 0 4,460,714 0 0
0% 0 0 5,141,686 0 0
5% 0 0 5,822,658 0 0
10% 0 0 6,503,630 0 0
Range

$0 $0

$2,723,889

$0 $0
c. Now conduct a scenario analysis. -10% -5% 5% 10%
Worst Bad

Base Good

Best First year sales (in units) 900 950 1,000 1,050 1,100
Sales price per unit $ 21,600 $ 22,800 $ 24,000 $ 25,200 $ 26,400 Variable cost per unit $ 19,250 $ 18,375 $ 17,500 $ 16,625 $ 15,750 Nonvariable costs $ 1,100,000 $ 1,050,000 $ 1,000,000 $ 950,000 $ 900,000 WACC

6.50% 6.21%

5.91%

5.61% 5.32%

Sensitivity Analysis
Sales price -0.1 -0.05 0 0.05 0.1 0 0 0 0 0 VC -0.1 -0.05 0 0.05 0.1 0 0 0 0 0 Units -0.1 -0.05 0 0.05 0.1 3779741.3881332502 4460713.5326771103 5141685.6772209741 5822657.8217648305 6503629.9663086943 Non-var. cost -0.1 -0.05 0 0.05 0.1 0 0 0 0 0 WACC -0.1 -0.05 0 0.05 0.1 0 0 0 0 0

Percentage Deviation from Base

NPV ($)

Scenario Summary
MP3

Scenario Summary
Base Best Worst Good Bad

Modified by Garza-Gomez, Xavier

First year sales (in units)

1,000 1,100 900 1,050 950

Sales price per unit

$24,000 $26,400 $21,600 $25,200 $22,800

Variable cost per unit

$17,500 $15,750 $19,250

Nonvariable costs

$900,000

WACC

5.91% 5.32% 6.50% 5.61% 6.21%

Net Present Value (at 10%)

$5,141,686

IRR

21.09%

MIRR

15.50%

6.18%

PI formula must be entered

Payback

2.90 1.72 4.00 2.16 3.63

0.40 0.10 0.10 0.20 0.20

20.8%

16.2%

14.5%

9.7%

– 0

2.89

0.69

0.00 0.08 0.09 0.02 0.02
0.00 0.02 0.04 0.01 0.01

0.00 0.00 0.00 0.00 0.00

0.00 1.36 1.23 0.53 0.54

	Modified by Garza-Gomez, Xavier	Modified by Garza-Gomez, Xavier	Created by Garza-Gomez, Xavier	Created by Garza-Gomez, Xavier
	Changing Cells:
$D$26
$D$27
$D$28	$16,630	$18,380
$D$29	$1,000,000	$1,100,000	$950,000	$1,050,000
$I$27
	Result Cells:
$D$76	$17,025,521	($4,630,931)	$10,805,635	($14,903)
$D$77	49.73%	-9.62%	35.		49%	6.16%
$D$78	29.97%	-5.79%	23.24%
$D$79
$D$80
Probability
Expected NPV	$ 5,454,279	StDev NPV	$ 5,942,170
Expected IRR	StDev IRR
Expected MIRR	StDev MIRR
Expected PI		– 0	StDev PI
Expected payback	StDev payback
97,714,858,145.74	133,893,621,847,176.00	101,711,475,897,417.00	28,637,001,922,229.00	29,911,960,846,625.50
Squared deviations
formulas hidden
Students must write the conclusion about the project and comment about its risk

CVM Scenarios

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Average

Range

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

/ Sales

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Audit Status Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

Minor improvement Mild recession Major improvement Continued deterioration

Op costs/ sales (excl depreciation) ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!
Depr / NPPE ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!
Cash/sales ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!
Receivables / sales ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!
Inventories / Sales ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

Acc payable / Sales ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

Current value Average value Minor improvement Mild recession Major improvement Continued deterioration
Using most recent values as starting point
Op costs/ sales (excl depreciation) ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!
Depr / NPPE ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!
Cash/sales ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!
Receivables / sales ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!
Inventories / Sales ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!
Net PPE / Sales ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!
Acc payable / Sales ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!
Accruals / Sales ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

3.5% 3.5% 4.00%

4.5% 2.5% Manually adjusted by analyst

3.5% 3.5% 4.00% 3.00% 4.5% 2.5%

WACC 5% 7%

good

base 3% 3.50%

Please highlight excluded cells and/or included cells in your analysis

Operating ratios

Max

Min
Garza-Gomez, Xavier: Formulas must be adjusted to fit the years selected

1/4 of range

Op costs/ sales (excl depreciation)

ERROR:#VALUE!

Depr / NPPE

Cash/sales

Receivables / sales

Inventories / Sales

Net PPE

Acc payable / Sales

Accruals

Growth Analysis

3yr growth

5yr growth

7yr growtn

10yr growth

14 yr growth

Geometric growth

Analyst must pick one of these numbers as expected growth in the near term

Total revenues growth

Arithmetic growth

Current value

Average value

Minor improvement

Mild recession

Major improvement

Continued deterioration

Using most recent values as starting point

Using AVERAGE VALUES as starting point

Net PPE / Sales

Accruals / Sales

Student must decide which subset of scenarios makes more sense (the ones that use average values of the ones that use the most recent value)

Base selected

(1 for current value, 2 for average)

Manually adjusted by analyst

Sales growth

Year 1 (short term growth)

Current values or historical average

Year 2 (short term growth)

Automatic formula: simple average of year 1 and year 3

Year 3 (long term growth)

3.00%

Year 4 (long term growth)

Automatic formula: same as year 3

Most optimistic

best

4.50%

3.50%

CV model

Jan-21

ERROR:#VALUE!

–

Projected Projected Projected Projected

Jan-21

Average value Minor improvement Mild recession Major improvement Continued deterioration

0.2% 1.9% 3.5% 3.5%

49% 49% 49% 49% 49% Costs / Sales

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

7% 7% 7% 7% 7% Depreciation / Net PPE

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

4% 4.3% 4.3% 4.3% 4.3% Cash / Sales

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

11% 11% 11% 11% Acct. Rec. / Sales

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

Inventories / Sales 0% 0% 0% 0% 0% Inventories / Sales

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

Net PPE / Sales

115% 115% 115% 115% Net PPE / Sales

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

5% 5% 5% 5% 5% Acct. Pay. / Sales

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

Accruals / Sales 3% 2.8% 2.8% 2.8% 2.8% Accruals / Sales

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

Tax rate 24% 24% 24% 24% 24%

9.57% 9.6% 9.6% 9.6% 9.6%

ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE! ERROR:#VALUE!

0.0350 0.0400 0.0300

Actual Projected Projected Projected Projected
Jan-21 Jan-22 Jan-23 Jan-24 Jan-25
Net Sales

Depreciation

Actual Projected Projected Projected Projected

Jan-21 Jan-22 Jan-23 Jan-24 Jan-25

Cash

Inventories

Accounts Payable

Accruals

Actual Projected Projected Projected Projected

Jan-21 Jan-22 Jan-23 Jan-24 Jan-25

Net PPE 102,705,041.1 102,951,533.2 104,876,726.9 108,547,412.3 112,346,571.7

na na

-2.9% 3.5%

0.2% 1.9% 3.5% 3.5%

/Sales), and return on invested capital (ROIC=NOPAT/Operating capital at beginning of year). Based on the spread between ROIC and WACC, do you think that the company will have a positive market value added (MVA= Market value of company – book value of company =

– Operating capital)?

Actual Projected Projected Projected Projected
Jan-21 Jan-22 Jan-23 Jan-24 Jan-25

32.6% 32.6% 32.6% 32.6%

122.2% 122.2% 122.2% 122.2%

27.6%

Weighted average cost of capital (WACC) na 9.6% 9.6% 9.6% 9.6%

17.6% 18.0% 18.0%

Actual Projected Projected Projected Projected
Jan-21 Jan-22 Jan-23 Jan-24 Jan-25

Free cash flow 29,017,504.2 27,775,338.7 26,958,399.2 27,901,943.2

3.5%

Weighted average cost of capital (WACC) 9.6% 9.6% 9.6% 9.6% 9.6%

29,017,504.2 27,775,338.7 26,958,399.2

Operating capital

Actual

Jan-21

419,294,816

ERROR:#VALUE!

13,044,000

-0

ERROR:#VALUE!

731,000

ERROR:#VALUE!

Stock price % Deviation from WACC Stock price

Base Case ERROR:#VALUE! Base Case ERROR:#VALUE!
-10% 3.2% ERROR:#VALUE! -10% 6.6% ERROR:#VALUE!
-5% 3.3% ERROR:#VALUE! -5% 6.9% ERROR:#VALUE!
0% 3.5% ERROR:#VALUE! 0%

ERROR:#VALUE!

5% 3.7% ERROR:#VALUE! 5% 7.7% ERROR:#VALUE!
10% 3.9% ERROR:#VALUE! 10% 8.0% ERROR:#VALUE!
% Deviation from

Stock price % Deviation from

Stock price

Base Case

-10%

-5%

145.93 0%

$145.93

10%

9.33

% Deviation from

Base Case $145.93

-10% 6.0%

-5% 6.4%

0% 6.7% $145.93
5% 7.0%

10% 7.4%

Net PPE/Sales Cost/Sales Sales growth (LT) Dep/Net PPE WACC

-10% $152.53

ERROR:#VALUE! $149.83 ERROR:#VALUE!

-5% $149.23

ERROR:#VALUE! $147.88 ERROR:#VALUE!

0% $145.93 $145.93 ERROR:#VALUE! $145.93 ERROR:#VALUE!
5% $142.63

ERROR:#VALUE! $143.98 ERROR:#VALUE!

10% $139.33

ERROR:#VALUE! $142.02 ERROR:#VALUE!

Range $13 $50 ERROR:#VALUE! $8 ERROR:#VALUE!

Chapter 12
Inputs from Income Statement for the Year Ending December 31 (Thousands of Dollars)
	Net Sales	$ 89,597,000	Estimated stock price
Number of shares (in millions)		731,000
Inputs from Balance Sheets for December 31 (Thousands of Dollars)
Marketable Securities	Notes payable
Long-term bonds		13,044,000
Preferred stock
Projected ratios and selected information for the current and projected years are shown below.
Main inputs for the model							Actual
					Jan-22						Jan-23			Jan-24	Jan-25	Stay the same
Sales Growth Rate
		Costs / Sales		$B$19
		Depreciation / Net PPE		$B$20
		Cash / Sales		$B$21
		Acct. Rec. / Sales					11%		$B$22
	$B$23
				1	15%		$B$24
		Acct. Pay. / Sales		$B$25
	$B$26
		Weighted average cost of capital (WACC)		Growth year1		$C$18
	Growth year 2		$D$18
a. Forecast the parts of the income statement and balance sheets necessary to calculate free cash flow.		Long term growth		$E$18					0.0350		0.0450		0.0250
Partial Income Statement for the Year Ending December 31 (Thousands of Dollars)
$ 89,597,000.0	$ 89,812,032.8	$ 91,491,517.8	$ 94,693,720.9	$ 98,008,001.2
Costs (except depreciation)	$ 44,162,361.3	$ 44,268,351.0	$ 45,096,169.1	$ 46,674,535.0	$ 48,308,143.8
$ 6,881,237.8	$ 6,897,752.7	$ 7,026,740.7	$ 7,272,676.6	$ 7,527,220.3
Total operating costs	$ 51,043,599.1	$ 51,166,103.7	$ 52,122,909.8	$ 53,947,211.7	$ 55,835,364.1
Earning before int. & tax	$ 38,553,400.9	$ 38,645,929.1	$ 39,368,608.0	$ 40,746,509.3	$ 42,172,637.1
Partial Balance Sheets for December 31 (Thousands of Dollars)
Operating Assets
$ 3,816,832.2	$ 3,825,992.6	$ 3,897,538.7	$ 4,033,952.5	$ 4,175,140.8
Accounts receivable	$ 9,452,483.5	$ 9,475,169.5	$ 9,652,355.1	$ 9,990,187.6	$ 10,339,844.1
$ 215,032.8	$ 215,548.9	$ 219,579.6	$ 227,264.9	$ 235,219.2
Net plant and equipment	$	102,705,041.1	$	102,951,533.2	$	104,876,726.9	$	108,547,412.3	$	112,346,571.7
Operating Liabilities
$ 4,202,099.3	$ 4,212,184.3	$ 4,290,952.2	$ 4,441,135.5	$ 4,596,575.3
$ 2,490,796.6	$ 2,496,774.5	$ 2,543,464.2	$ 2,632,485.4	$ 2,724,622.4
b. Calculate free cash flow for each projected year. Also calculate the growth rates of free cash flow each year to ensure that there is constant growth (i.e., the same as the constant growth rate in sales) by the end of the forecast period.
Calculation of FCF
Operating current assets	13,484,348.5	13,516,710.9	13,769,473.4	14,251,405.0	14,750,204.2
Operating current liabilities	6,692,895.9	6,708,958.9	6,834,416.4	7,073,621.0	7,321,197.7
Net operating working capital	6,791,452.6	6,807,752.1	6,935,057.1	7,177,784.0	7,429,006.5
Net operating capital	109,496,493.7	109,759,285.3	111,811,783.9	115,725,196.4	119,775,578.2
NOPAT	29,210,191.4	29,280,295.8	29,827,837.4	30,871,811.7	31,952,325.1
Investment in operating capital	262,791.6	2,052,498.6	3,913,412.4	4,050,381.9
	Free cash flow			29,017,504.2			27,775,338.7			26,958,399.2		27,901,943.2
Growth in FCF	-4.3%
Growth in sales
c. Calculate operating profitability (OP=NOPAT/Sales), capital requirements (CR=	Operating capital	Value of operations
Operating profitability (OP=NOPAT/Sales)					32.6%
Capital requirement (CR=Operating capital/Sales)					122.2%
Return on invested capital (ROIC=NOPAT/Operating capital at start of year)	26.7%	27.2%		27.6%
Spread between ROIC and WACC	17.2%
Yes, because the spread is positive, the company should have a positive MVA.
d. Calculate the value of operations and MVA. (Hint: first calculate the horizon value at the end of the forecast period, which is equal to the value of operations at the end of the forecast period.
Long-term constant growth in FCF
Horizon value	475,464,765.2
FCF in Years 1-3 and FCF4 + horizon value in Year 4	503,366,708.4
Value of operations (PV of FCF + HV)		419,294,816
109,496,494
Market value added (MVA=Market value of company – book value of company = Value of operations – Operating capital)	309,798,322
e. Calculate the price per share of common equity
Value of Operations
Plus Value of Mkt. Sec.
Total Value of Company
Less Value of Debt
Less Value of Pref.
Value of Common Equity
Divided by number of shares
	Price per share
				% Deviation from		Sales growth (LT)
7.3%
	Cost/Sales		Net PPE/Sales
	$			145.93
					$145.93
44.4%	170.98	103.2%		$152.53
46.8%	158.45	108.9%		$149.23
49.3%	114.6%
51.8%	133.40	120.4%		$142.63
54.2%	120.88	126.1%			$13
	Dep/Net PPE
	$149.83
	$147.88
	$143.98
	$142.02
Stock price at Different Deviations from Base
Deviation from Base Case
$170.98
$158.45
$133.40
$120.88

Sensitivity Analysis
Net PPE/Sales -0.1 -0.05 0 0.05 0.1 152.52643767873272 149.22708231523475 145.92772695173679 142.62837158823885 139.32901622474196 Cost/Sales -0.1 -0.05 0 0.05 0.1 170.97722475362562 158.45247585268018 145.92772695173679 133.40297805079331 120.87822914984707 Sales growth (LT) -0.1 -0.05 0 0.05 0.1 0 0 0 0 0 Dep/Net PPE -0.1 -0.05 0 0.05 0.1 149.83085950424231 147.87929322799005 145.92772695173679 143.97616067548361 142.02459439922933 WACC -0.1 -0.05 0 0.05 0.1 0 0 0 0 0 Percentage Deviation from Base

Share price

Scenario Summary MP4

Scenario Summary

Minor improvement

Major improvement Continued deterioration

Created by Garza-Gomez, Xavier
Modified by Garza-Gomez, Xavier on 4/22/2019
Modified by Garza-Gomez, Xavier on 4/12/2021 Created by Garza-Gomez, Xavier
Modified by Garza-Gomez, Xavier on 4/22/2019
Modified by Garza-Gomez, Xavier on 4/12/2021 Created by Garza-Gomez, Xavier
Modified by Garza-Gomez, Xavier on 4/22/2019
Modified by Garza-Gomez, Xavier on 4/12/2021 Created by Garza-Gomez, Xavier
Modified by Garza-Gomez, Xavier on 4/22/2019
Modified by Garza-Gomez, Xavier on 4/12/2021 Created by Garza-Gomez, Xavier
Modified by Garza-Gomez, Xavier on 4/22/2019
Modified by Garza-Gomez, Xavier on 4/12/2021

Changing Cells:

Costs / Sales $B$19

0.4929

Depreciation / Net PPE $B$20

0.0670

Cash / Sales $B$21

0.0426

0.0412

Acct. Rec. / Sales $B$22 0.1055 0.1055

Inventories / Sales $B$23

0.0024 0.0043 0.0024

0.0024 0.0048

Net PPE / Sales $B$24

1.1463

Acct. Pay. / Sales $B$25

0.0469

Accruals / Sales $B$26

0.0278 0.0212 0.0278

0.0278 0.0226

Growth year1 $C$18 0.0024 0.0024

Growth year 2 $D$18

0.0187

0.0037

Long term growth $E$18 0.0350 0.0350 0.0350 0.0400 0.0300 0.0450 0.0250

Result Cells:

Value of operations

141,753,663

Price per share

145.93 145.93

Total

50%

20% 20% 5% 5%

7 23 853 846

2299

27
From to

if current price is in range

if current price is above

SELL

Expected price
148.53

10%

HOLD if current price is in range
BUY if current price is below

Current price is 183.65

recommendation would be SELL

Allowed variation SELL
5% SELL
10% SELL
15% SELL
20% SELL

HOLD

30% HOLD

Current Values:	Continuation	Averages	Mild deterioration
					Created by Garza-Gomez, Xavier Modified by Garza-Gomez, Xavier on 4/22/2019 Modified by Garza-Gomez, Xavier on 4/12/2021
		0.4929	0.5082	0.5001	0.4920	0.5073
	0.0670	0.0624	0.0633	0.0707	0.0595	0.0713
	0.0426	0.1034		0.0412	0.1079	0.1732
0.1028	0.0981	0.1129	0.0908	0.1161
					0.0024	0.0036
			1.1463	1.0721	1.1056	1.0650
	0.0469	0.0483	0.0511	0.0427	0.0553	0.0405
			0.0278	0.0252
	0.0037	0.0124	-0.0076	0.0224	-0.0176
	0.0187	0.0194	0.0262	0.0112	0.0337
$B$94		141,753,663	140,092,136	165,491,052	121,993,037	198,523,908	107,913,246
$B$111	143.70	177.73	119.45	222.00	100.58
Notes: Current Values column represents values of changing cells at
time Scenario Summary Report was created.
Assigned probabilities	0% Garza-Gomez, Xavier: Must match the scenario chosen in previoust sheets	100% Garza-Gomez, Xavier: Probability must total 100%
Sq Deviation	5397
	Expected price
	148.53
Standard deviation
One-standard deviation range
121.55	175.51
			HOLD
	BUY if current price is below
							SELL	Current price is	183.65
Based on standard deviation
	recommendation would be
	Allowed variation
Lower limit	Upper limit
133.68	163.38
SELL if current price is above
Based on allowed variation
Sensitivity analysis	Student must clearly say if he/she would buy/hold or sell the stock based on all the calculations
Please include your observations about the range of prices and state how confident you are in your analysis
Recommendation
25%

SAMPLE REPORT FOR MP2

Cost of Capital calculation for company name & logo

Submitted to: Class, professor

By: student name

On: date

FINC 6352 – Financial Management Sample MP2 – Cost of Capital Calculation for MCD

Company Profile

Source: https://finance.yahoo.com/

Company name: McDonald’s Inc.

Ticker: MCD

Sector: Consumer Cyclical
Industry: Restaurants

Cost of capital components

Cost of debt
This company has had an implied historical cost of debt around 3%

Cost of debt, historical costs
12/1/2017 12/1/2016 12/1/2015 12/1/2014 12/1/2013

Long-term debt 29536400 25878500 24122100 14989700 14129800
Interest paid 885200 873500 640800 573200 532700

Implied interest rate 3.00% 3.38% 2.66% 3.82% 3.77%

However, historical cost is not relevant. What we need is what the market demands for the
debt of this company, which is equal to the cost of new debt issues.

MCD has a Moody’s rating of Baa1 and a S&P’s rating of BBB+

https://www.moodys.com/credit-ratings/McDonalds-Corporation-credit-rating-479500

https://www.moodys.com/credit-ratings/McDonalds-Corporation-credit-rating-47950

FINC 6352 – Financial Management Sample MP2 – Cost of Capital Calculation for MCD

https://www.standardandpoors.com/en_US/web/guest/ratings/entity/-/org-
details/sectorCode/CORP/entityId/101460

McDonald’s has several issues of debt with maturities ranging from 2020 all the way to 2048

The reference for cost of capital calculations is 10 years. Looking at the different issues we see
two of them maturing around 2029

http://finra-markets.morningstar.com/BondCenter/Results.jsp

Average yield for these two issues is 3.6%, which is our estimate for new debt

Cost of preferred stock
This company doesn’t use preferred stock to finance its operations so we don’t need to estimate Rp.

https://www.standardandpoors.com/en_US/web/guest/ratings/entity/-/org-details/sectorCode/CORP/entityId/101460

http://finra-markets.morningstar.com/BondCenter/Results.jsp

FINC 6352 – Financial Management Sample MP2 – Cost of Capital Calculation for MCD

Cost of equity
We’ll be using three methods to develop our estimate for the cost of equity

DCF approach

This method can only be used for dividend paying companies. The cost of equity is defined as
the sum of the dividend yield and the expected growth in dividends.

Dividend yield is directly taken from a website that displays Forward yield

https://finance.yahoo.com/quote/MCD?p=MCD

For MCD, it is estimated to be 2.57%

To estimate growth in dividends, we can use 3 sources:

First is the analysts’ average expectation for earnings growth in the next 5 years.

FINC 6352 – Financial Management Sample MP2 – Cost of Capital Calculation for MCD

https://finance.yahoo.com/quote/MCD/analysis?p=MCD

It is important to note that sometimes analysts are too optimistic and produce estimates that
are too high. That is why it is important to use two more methods

Historical growth of dividends

Growth of dividends

Recent growth
Last
year

Last 2
years

Last 3
years

Last 5
years

Last 7
years

Last 10
years

Dividends declared per common
share 6.1% 5.5% 5.3% 4.2% 7.8% 9.8%

From the trend in the last 2 years we could say that it will be above 6%. However, MCD has
had negative equity in the last 2 years, indicating high levels of debt, which makes me a bit more
conservative in my forecast. My number is 4.2%, which is the average growth in the last 5 years.

The last method to estimate dividend growth is the concept of sustainable growth rate

The formula used is ROE x (1 – Dividend Payout ratio)

0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%

Dec-99 Dec-02 Dec-05 Dec-08 Dec-11 Dec-14 Dec-17

Growth
Dividends declared per common share

FINC 6352 – Financial Management Sample MP2 – Cost of Capital Calculation for MCD

Historical payout ratio
12/1/17 12/1/16 12/1/15 12/1/14 12/1/13 12/1/12
Net income 5192300 4686500 4529300 4757800 5585900 5464800
Common stock dividends 3089200 3058200 3230300 3216100 3114600 2896600

Payout ratio 59.5% 65.3% 71.3% 67.6% 55.8% 53.0%

ROE 12.8% 7.5% 6.2% 6.6%

Sustainable growth NA NA 3.7% 2.4% 2.7% 3.1%

Taking numbers from the statement of cash flows we see that payout has been between 35
and 71%, sustainable growth has moved between 2.4 and 3.7 percent. Excluding the most recent
2 years we get an average of 3% sustainable growth

From the 3 growth estimates and the dividend yield we get our first estimate for the cost of
equity

Three estimates of g
Analysts earnings estimate 6.55%
My estimate based on historical
growth 4.20%
Sustainable growth 3%

Average 4.56%

Dividend yield 2.57%

Rs 7.13%

FINC 6352 – Financial Management Sample MP2 – Cost of Capital Calculation for MCD

CAPM approach

Formula for the cost of equity is Rs = Rrf + Beta * MRP

Market risk premium is estimated to be 5.5%. For Risk free rate we use the 10 year Treasury
bond, which is 2.58%

http://finra-markets.morningstar.com/BondCenter/Default.jsp

For beta we use different sources to estimate it

First, based on historical prices, we calculate returns for the stock and the S&P 500 and run
the regression line to estimate beta. Our calculations yield a beta of 0.47

Using three financial websites to obtain market beta we get an average value

y = 0.4752x + 0.011

–

0.1

–

0.05

0
0.05
0.1

0.15

0.2

-0.15 -0.1 -0.05 0 0.05 0.1

Ret MCD

http://finra-markets.morningstar.com/BondCenter/Default.jsp

FINC 6352 – Financial Management Sample MP2 – Cost of Capital Calculation for MCD

Average beta estimate

Using 5 years of data 0.475
Yahoo (3 years) 0.39
MSN Money 0.52
Reuters 0.65

Average beta 0.509

Then the estimate of Rs is obtained

Average beta estimate 0.509

Market Risk Premium 5.50%

Risk free rate 2.59%

Rs 5.39%

Risk and return of the stock
It is important to note that when we estimated historical returns for the most recent 5 years we see that
MCD has produced very high returns compared to the market but with a very low beta. This indicates
that MCD exceeded market expectations.
Looking at total risk of the stock (SD) we only see a small increase in risk.

S&P 500 MCD
Yearly average 8.7% 17.4%

Yearly SD 11.2% 13.9%
Beta 1.0 0.51

Rd plus a risk premium approach

The third method to obtain Rs is to use the estimate of the cost of debt (Rd) and add a risk
premium.

The historical risk premium between the debt and the equity of companies is about 4%

Rd 3.59%
Risk Premium 4%

Rs 7.59%

FINC 6352 – Financial Management Sample MP2 – Cost of Capital Calculation for MCD

Capital Structure

Given that this company doesn’t have preferred stock, we only need to estimate Wd and Ws. MCD did
have preferred stock in the 1990s but they cancelled in 1997 and they haven’t used this method of
financing their operations.

Another estimate we need to obtain is the effective tax rate for the firm

We use 5 years of data and calculate the average

Tax rate 12/1/2017 12/1/2016 12/1/2015 12/1/2014 12/1/2013

Income taxes paid 2786300 2387500 1985400 2388300 2546000
Income before provision for income
taxes 8573500 6866000 6555700 7372000 8204500

Implied rate 32.5% 34.8% 30.3% 32.4% 31.0%

Average tax rate last 5 years 32.2%

Using book values
We observe that since equity is negative in recent years, we can’t estimate weights for those years

Capital structure
Based on book value of firm

12/1/2017 12/1/2016 12/1/2015 12/1/2014 12/1/2013
Long-term debt (D) 29536400 25878500 24122100 14989700 14129800
Total shareholders’ equity (deficit) (E) -3268000 -2204300 7087900 12853400 16009700

Value of firm (V) NA NA 31210000 27843100 30139500

D/V NA NA 77.3% 53.8% 46.9%
E/V NA NA 22.7% 46.2% 53.1%

Average for last 5 years
D/V 59.3%
E/V 40.7%

Using market values
The estimation of weights using market values depends on the day that stock price is measured. It is
important to decide the day in which market capitalization is measured. A good practice is to measure
market cap at the end of the fiscal year. Given MCD has a fiscal year ending in December we’ll use end
of December 2018 to estimate market cap.

In addition to the calculation at the end of 2018, we include a historical calculation of weights based on
stock prices in December 2014, December 2015, December 2016 and December 2017

FINC 6352 – Financial Management Sample MP2 – Cost of Capital Calculation for MCD

Capital structure
Based on market value of firm

Calculating historical market equity
12/1/2017 12/1/2016 12/1/2015 12/1/2014
Long-term debt (D) 29536400 25878500 24122100 14989700
Year-end shares outstanding 794100 819300 906800 962900
Stock price end of year 172.12 121.72 118.14 93.70
Market capitalization (E) 136680488 99725197 107129351 90223727
Value of the firm (V) 166216888 125603697 131251451 105213427

D/V 17.8% 20.6% 18.4% 14.2%
E/V 82.2% 79.4% 81.6% 85.8%
Average for last 4 years
D/V 17.7%
E/V 82.3%

Market capitalization at the close of the most recent fiscal
year
Based on market value of firm Dec-18
Debt at the close of the fiscal year 31075300
Stock price at close of fiscal year 177.57
Shares outstanding, most recent 765320
Market capitalization (E) 135897878
Value of the firm (V) 166973178

D/V 18.6%
E/V 81.4%

It is important to note that though Mergent data ends in 2017, the financial statements for 2018 are
available now. Yahoo Finance was used to retrieve the most recent amount for long-term debt and for
the number of shares outstanding.

FINC 6352 – Financial Management Sample MP2 – Cost of Capital Calculation for MCD

Weighted Average Cost of Capital
The calculations of WACC are shown for both methods of calculating weights

Weighted Average Cost of Capital

Tc 32.2%
Rd 3.59%
1) DCF Rs 7.13%
3) Rd + RP 7.59%
Avg Rs 7.36%

Calculating capital structure with book values

D/V 59.3%
E/V 40.7%

Estimate of WACC 4.44%

Calculating capital structure with market
values

D/V 18.6%
E/V 81.4%

Estimate of WACC 6.45%

As we can see from the results, the WACC obtained with market values is higher than that obtained
using book values. This is normally the case given that Rs is normally higher than Rd and Ws is typically
lower when we use book values.

The final WACC estimate obtained with market values is more than 2% higher than the one obtained
using book values.

Capital Structure
Using book values
Using market values
Weighted Average Cost of Capital

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Ind ratios

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Analysis LOW

Cost of debt

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CAPM & beta

WACC

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Scenario Summary MP4

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Scenario Summary
MP3