Beruflich Dokumente
Kultur Dokumente
1990
1991
1992
1993
517
948
1399
2073
2551
582
662
693
690
658
1099
1610
2092
2763
3209
14.6
14.6
14.6
14.6
14.6
0.87
0.76
0.66
0.58
0.51
13553
13553
13553
8008
9279
11030
21561
22832
24583
Net Value
16357
17628
19379
71
77
85
Cash Flows
Present Value
Valuation
Growth in cash flows after 1998
Present value of cash flows, 1989-98
Present Value of terminal value [e]
a=case exhibit 5
b=cash flows available for capital equal cash flows available for capital payments plus cash interest
c=discount rate is computed using the CAPM, with an unlevered asset beta of 0.70, a risk-free rate of 9% and a risk premium
d=the cumulative discount factor for each year is the present value of $1 received at the end of the year
e=calculated as the present value in 1988 of a growing perpetuity of the 1998 cash flow available to capital
f=assumes 229 million shares outstanding
1994
1995
1996
1997
1998
2869
3253
3617
4075
4589
594
458
410
259
-21
3463
3711
4027
4334
4568
14.6
14.6
14.6
14.6
14.6
0.44
0.39
0.34
0.29
0.26
Cost of capital under the pre-bid plan using tax-adjusted discount rates (millions of dollars)
Assumptions
Unlevered asset beta = 0.70
Assumed debt beta = 0
Risk free rate = 9%
after tax expected return [a]=5.9%
risk premium = 8%
Beginning of year book values
Assumed debt
Market Value of equity [b]
value of rjr nabisco
Equity beta [c] 0.98
cost of equity [d] (in %)
WACC [in %]
1989
5204
12790
17994
1990
4894
14949
19843
1991
4519
17405
21924
1992
3798
20199
23997
1993
3982
23361
26343
1994
2582
26939
29521
0.98
16.9
13.7
0.94
16.5
13.8
0.89
16.1
14
0.84
15.7
14.1
0.8
15.4
14.3
0.77
15.2
14.3
a=cost of debt is assumed to be the risk free rate because the beta of the debt is assumed to be zero. The tax rate is 34%
b= the market value of equity is assumed to grow at the cost of equity
c= the levered equity beta (beta-e)=E/V[beta-a], where E is the market value of jr nabisco and beta-a is the unlevered asset b
d=caculated using the CAPM
1995
1854
31016
32870
1996
0
35649
35649
1997
0
40853
40853
1998
0
46818
46818
0.75
15
14.4
0.7
14.6
14.6
0.7
14.6
14.6
0.7
14.6
14.6
Valuing the cash flows for capital under the pre bid plan using tax adjusted discount rates(millions of dollars except per sha
Cash Flows
1989
1990
1991
1992
1993
Cash flows available for capital payments
517
948
1399
2073
2551
After tax cash interest
384
437
457
455
434
Cash flows available for capital
901
1385
1856
2528
2985
WACC(d)
13.7%
13.8%
14.0%
14.1%
14.3%
Cumulative discount factor
0.88
0.77
0.68
0.59
0.52
Present value
792.88 1066.45 1262.08 1491.52
1552.2
As per sheet
1070
1258
1502
1552
Valuation
Growth in cash flows after 1998
0%
2%
Present value of cash flows,1989-1998
12910
12910
Present value of terminal value(f)
8273
9586
21183
5204
15979
69.77729
22496
5204
17292
75.51092
24304
5204
19100
83.40611
1997
4075
171
4246
14.6%
0.3
1273.8
1285
1998
4589
-14
4575
14.6%
0.26
1208
Valuing the cash flows to capital under the managemnt group plan when interest tax sheilds are included in the cash flows
Cash Flows
Cash flows available for capital payments
After tax cash interest
Cash flows available for capital
WACC(d)
Cumulative discount factor
Present value
Valuation
Growth in cash flows after 1998
Present value of cash flows,1989-1998
Present value of terminal value(f)
1989
12018
2792
14810
14.6%
0.87
12884.7
As per sheet 12923
1990
593
1353
1946
14.6%
0.76
1478.96
1482
1991
919
1286
2205
14.6%
0.66
1455.3
1465
1992
1282
1183
2465
14.6%
0.58
1429.7
1429
0%
23982
6427
2%
23982
7447
30408
5204
25204
110.0611
31428
5204
26224
114.5153
1994
1946
850
2796
14.6%
0.44
1230.24
1234
4%
23982
8852
32833
5204
27629
120.6507
1995
2344
624
2968
14.6%
0.39
1157.52
1143
1996
2797
351
3148
14.6%
0.34
1070.32
1058
1997
3332
0
3332
14.6%
0.29
966.28
977
1998
3666
0
3666
14.6%
0.26
953.16
938
TN-5 Capital structure for RJR Nabisco under the management group plan (millions of dollars)
1989
Bank debt
Amount = $ 15000
Interest rate = 12 %
1990
Beginning Balance
Interest
Paydown
Ending Balance
15000
1800
11708
3292
2392
395
218
3075
5204
572
310
4894
4894
538
375
4519
3000
420
0
3000
3000
420
0
3000
1373
258
0
0
1632
1632
307
0
0
1938
Assumed Debt
Amount = $5204
Beginning Balance
Interest
Paydown
Ending Balance
Subordinated Debt
Amount = $3000
Beginning Balance
Interest
Paydown
Ending Balance
PIK Preferred
Amount = $ 1373
Beginning Balance
PIK dividends
Cash Dividends
Paydown
Ending Balance
Convertible
Beginning Balance
PIK dividends
Cash Dividends
Paydown
Ending Balance
Amount = $ 916
1035
195
0
1229
1991
1992
1993
1994
1995
1996
1997
1998
3075
369
198
2877
2877
345
466
2411
2411
289
1194
1217
1217
145
1217
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
4519
497
721
3798
3798
418
816
2982
2982
328
400
2584
1854
204
1854
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3000
420
0
3000
3000
420
0
3000
3000
420
0
3000
3000
420
0
3000
3000
420
0
3000
2510
351
2510
0
0
0
0
0
0
0
0
0
1938
364
0
0
2303
2303
433
0
0
2736
2736
514
0
0
3259
3250
611
0
0
3861
3861
726
0
0
4587
4857
862
0
0
5162
5162
970
0
0
2801
2801
527
0
0
0
1229
231
1460
275
1735
326
2061
387
2448
460
2909
547
3455
650
4105
772
1460
1735
2061
2448
2909
3455
4105
% (1990 - 1998)
TN-6 Cost of capital under management group plan using tax adjusted discount rates (millions of dollars)
Assumptions
Bank Debt
Subordinate Debt:
beta
0
beta
0.25
Unlevered asset Beta
0.7
after tax rate (a) 0.06
after tax rate (a) 0.07
Risk free rate
9%
risk premium
8%
Assumed debt:
preferred stock
beta
0
beta
0.25
after tax rate (a) 0.06
interest rate
0.07
1989
Beginning of year book values (b)
Assumed debt
bank debt
sunordinated debt
5204
15000
3000
preferred stock
convertible preferred
1373
916
2500
27993
7.3
67.50%
WACC(f)
11.70%
(a)
(b)
c
Using a 34% tax rate, after tax debt rates are calculated as 66% of the CAPM determ
Exhibit TN-5
Value at the beginning of the year. Assumes that the market value of equity begins
(d)
The equity beta with positive subordinated debt and preferred stock betas is
1990
1991
1992
1993
1994
1995
1996
1997
1998
4894
3292
3000
4519
3075
3000
3798
2877
3000
2982
2411
3000
2852
1217
3000
1854
0
3000
0
0
2510
0
0
0
0
1632
1035
1938
1229
2303
1460
2736
1735
3250
23061
3861
2448
4587
2909
5162
3455
2801
4105
4187
5461
6905
5830
10347
12369
14614
17108
19916
18039
19222
20343
21394
22457
23532
24620
25725
26822
2.7
2.2
1.8
1.5
1.3
1.1
0.9
0.9
30.40%
26.50%
23.50%
21.30%
19.50%
18.10%
17.10%
16.40%
15.80%
12.00%
12.20%
12.40%
12.50%
12.70%
12.90%
13.10%
13.30%
13.60%
s 66% of the CAPM determined rate based on the assumed beta. Preferred stock expected returns are also calculated using the CAPM
ket value of equity begins at the management groups equity investment of $2.5 billion and grows at the cosqt of equity
e cosqt of equity
Valuing the cash flows to capital under the managemnt group plan when tax adjusted discount rates are included in the ca
Cash Flows
1989
Cash flows available for capital payments
12018
After tax cash interest
1843
Cash flows available for capital
13861
WACC(d)
11.7%
Cumulative discount factor
0.9
Present value
12474.9
As per sheet 12411
Valuation
Growth in cash flows after 1998
Present value of cash flows,1989-1998
Present value of terminal value(f)
1990
593
893
1486
12.0%
0.8
1188.8
1187
1991
919
849
1768
12.2%
0.71
1255.28
1259
1992
1282
781
2063
12.4%
0.63
1299.69
1308
0%
23375
8175
2%
23375
9580
31550
5204
26346
115.048
32955
5204
27751
121.1834
1993
1594
685
2279
12.5%
0.56
1276.24
1284
rates are included in the cash flows(mn of dollrs exceot per share data)
1994
1946
561
2507
12.7%
0.5
1253.5
1253
4%
23375
11568
34943
5204
29739
129.8646
1995
2344
412
2756
12.9%
0.44
1212.64
1220
1996
2797
232
3029
13.1%
0.39
1181.31
1187
1997
3332
0
3332
13.3%
0.35
1166.2
1151
1998
3666
0
3666
13.6%
0.3
1099.8
1115
Valuing the cash flows to capital under the KKR's plan when interest tax sheilds are included in the cash flows(mn of dollrs
Cash Flows
1989
1990
Cash flows available for capital
3732
payments3521
After tax cash interest
2548
2103
Cash flows available for capital
6280
5624
WACC(d)
14.6%
14.6%
Cumulative discount factor 0.87
0.76
Present value
5463.6 4274.24
As per sheet
5480
4283
Valuation
Growth in cash flows after 1998
0%
Present value of cash flows,1989-1998 21872
Present value of terminal value(f)
7572
29444
5204
24240
105.8515
1991
1414
1685
3099
14.6%
0.66
2045.34
2059
1992
1740
1522
3262
14.6%
0.58
1891.96
1891
1993
1983
1321
3304
14.6%
0.51
1685.04
1672
1994
2383
1088
3189
14.6%
0.44
1403.16
1532
2%
21872
8774
4%
21872
10429
30646
5204
25442
111.1004
32301
5204
27097
118.3275
1995
2832
806
3319
14.6%
0.39
1294.41
1401
Discount rate is computed using the CAPM model with an unlevered asset beta of 0.7 a risk free rate of 9% and risk premium
Assume 229 million shares outstanding
Assume a 34% tax rate equals interest in Exhibit 5 times 66%
Cash flows available for capitalequlas Cash flows available for capital payments plus cash interest
1997
3956
21
3977
14.6%
0.29
1153.33
1166
1998
4319
0
4319
14.6%
0.26
1122.94
1106
TN-9 capital structure for RJR Nabisco under KKR's Operating Plan (millions of dollars)
Bank debt
Amount = $ 12380
Amount = $5204
Amount = $3500
Beginning Balance
Interest
Paydown
Ending Balance
PIK Preferred
Amount = $ 1373
Beginning Balance
PIK dividends
Cash Dividends
Paydown
Ending Balance
Convertible
Beginning Balance
PIK dividends
Cash Dividends
Paydown
Ending Balance
12380
1486
3422
8958
8958
1075
3146
5812
5204
572
310
4894
4894
538
375
4519
3500
490
0
3500
3500
490
0
3500
Beginning Balance
Interest
Paydown
Ending Balance
Subordinated Debt
1990
Interest rate = 12 %
Beginning Balance
Interest
Paydown
Ending Balance
Assumed Debt
1989
Amount = $ 2518
1580
237
0
0
1817
2896
435
0
0
3331
1991
1992
1993
1994
1995
1996
1997
1998
5812
697
693
5119
5119
614
924
4195
5195
503
1583
2612
2612
313
1983
629
629
76
629
0
0
0
0
0
0
0
0
0
0
0
0
0
4519
497
721
3798
3798
418
816
2982
2982
328
400
2582
2582
284
400
2182
2182
240
2182
0
0
0
0
0
0
0
0
0
0
0
0
0
3500
490
0
3500
3500
490
0
3500
3500
490
0
3500
3500
490
0
3500
3500
490
21
3479
3479
487
3330
149
149
21
149
0
0
0
0
0
2129
366
0
0
2495
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3958
744
0
0
4702
4702
884
0
0
5586
5586
1050
0
0
6636
6636
1248
0
0
7883
7883
1482
0
0
9365
9365
1761
0
3806
7320
7320
1376
0
4319
4377
17.2%(1991-1992)
1817
312
0
0
2129
Cost of capital under KKR's plan using the tax-adjusted discount rates [millions of dollars]
Assumptions
Unlevered beta = 0.70
Risk free rate = 9%
Risk premium =8%
Beginning of year book values [b]
Assumed debt
Bank debt
senior subordinated debt
subordinated debt
converting debt
preferred stock
market value of equity [c]
value of rjr nabisco
equity beta [d]
cost of equity [e]
wacc [f]
1989
1990
5204
12380
3500
0
1373
2518
1500
26475
11.1
98
11.5
4894
8958
3500
0
1580
2896
2970
24798
5.2
50.4
11.7
a=using a 34% tax rate, after tax debt rates are calculated as 66% of the CAPM determined rate based on the assumption bet
b= exhibit 9
c=value at the beginning of the year. Assumes that the market value of equity begins at KKR's equity investment of $2.5 billio
Beta
After tax rate [a]
Bank debt Sub-ordinated debt converting debt assumed debt preferred stock
0
0.25
0.25
0
0.25
0.06
0.07
0.07
0.06
0.07
1991
1992
1993
1994
1995
1996
4519
5812
3500
0
1817
3331
4466
23446
3.2
34.5
11.9
3798
5119
3500
0
2129
3958
6008
24512
2.5
28.7
12
2982
4195
3500
0
0
4792
10469
26848
1.5
21.3
12.6
2582
2612
3500
0
0
5586
12695
26975
1.3
19.5
12.8
2182
629
3500
0
0
6636
15167
28114
1.1
18
12.9
0
0
3479
0
0
7883
17903
29266
1
16.9
13.1
ed rate based on the assumption beta. Preferred stock expected returns are also calculated using the CAPM.
KKR's equity investment of $2.5 billion and grows at the cost of equity. Convertible debt becomes equity in 1992.
1997
1998
0
0
149
0
0
9365
20926
30441
0.9
16.2
13.4
0
0
0
0
0
7320
24324
31644
0.8
15.7
13.7
Valuing the cash flows to capital under the KKR's plan using tax adjusted discount rates (mn of dollrs exceot per share data
Cash Flows
Cash flows available for capital payments
After tax cash interest
Cash flows available for capital
WACC(d)
Cumulative discount factor
Present value
As per sheet
Valuation
Growth in cash flows after 1998
Present value of cash flows,1989-1998
Present value of terminal value(f)
1989
3732
1682
5414
11.5%
0.9
4872.6
4854
1990
3521
1388
4909
11.7%
0.8
3927.2
3941
1991
1414
1112
2526
11.9%
0.72
1818.72
1813
1992
1740
1005
2745
12.0%
0.64
1756.8
1758
1993
1983
872
2855
12.6%
0.57
1627.35
1625
1994
2383
718
2915
12.8%
0.5
1457.5
1565
0%
21206
9628
2%
21206
11268
4%
21206
13583
30834
5204
25630
111.9214
32474
5204
27270
119.083
34789
5204
29585
129.1921
Discount rate is computed using the CAPM model with an unlevered asset beta of 0.7 a risk free rate of 9% and risk premium
Assume 229 million shares outstanding
Assume a 34% tax rate equals interest in Exhibit 5 times 66%
Cash flows available for capitalequlas Cash flows available for capital payments plus cash interest
1996
3330
321
3344
13.1%
0.39
1304.16
1442
1997
3956
14
3970
13.4%
0.35
1389.5
1382
1998
4319
0
4319
13.7%
0.31
1338.89
1322
Summary of the values of the three different rjr nabisco plans when
interest tax shields are included in the cash flows (millions of dollars
except per share data)
Discount rate [a]
cumulative discount factor [b]
1989
14.6
0.87
1990
14.6
0.76
1991
14.6
0.66
517
582
1099
959
948
662
1610
1225
1399
693
2092
1390
12018
2792
14810
12923
593
1353
1946
1482
919
1286
2205
1465
3732
2548
6280
5480
3521
2103
5625
4283
1414
1685
3099
2059
Valuing the cash flows to capital under the pre-bid plan [interest tax
shields in cash flows]
Cash flows for available for capital payments[h] [exh.5]
Cash interest [exh.5]
Cash flows available for capital [h]
present value
Valuing the cash flows to capital under the management group plan
[interest tax shields in cash flows]
Cash flows for available for capital payments[h] [exh.5]
Cash interest [exh.5]
Cash flows available for capital [h]
present value
Valuing the cash flows to capital under KKR's plan [interest tax
shields in cash flows]
Cash flows for available for capital payments[h] [exh.5]
Cash interest [exh.5]
Cash flows available for capital [h]
present value
1992
14.6
0.58
1993
14.6
0.51
1994
14.6
0.44
1995
14.6
0.39
1996
14.6
0.34
1997
14.6
0.29
2073
690
2763
1602
2551
658
3209
1624
2869
594
3463
1529
3253
458
3711
1429
3617
410
4027
1354
4075
259
4334
1271
4589
-21
4568
1169
31288
8008
1282
1183
2465
1429
1594
10387
2631
1331
1946
850
2796
1234
2344
624
2967
1143
2797
351
3149
1058
3332
0
3332
997
3666
0
3666
938
25109
6427
1740
1522
3262
1891
1983
1321
3304
1672
2383
1088
3471
1532
2832
806
3637
1401
3330
487
3817
1283
3956
21
3977
1166
4319
0
4319
1106
29584
7572
Total [d]
21561
5204
16357
71
30408
5204
25204
110
29444
5204
24240
106
TN-13 Summary of values of the three different RJR Nabisco plans using after tax adjusted discount rates (millions of dollar
1989
1990
1991
Valuing the cash flows to capital under the prebid plan (interest tax shield in WACC)
Cash Flows Available for
517
948
1399
Capital Payments (f)
384
437
457
After tax cash interest
Cash Flows Available for
901
1385
1856
Capital
WACC
13.70%
13.80%
13.90%
Cumulative WACC
0.88
0.77
0.68
Present Value
793
1070
1259
Valuing the cash flows to capital under the management group plan (interest tax shields in WACC)
Cash Flows Available for
Capital Payments
12018
593
919
After tax cash interest
1843
893
849
Cash Flows Available for
Capital
13861
1486
1768
WACC
11.70%
12.00%
12.20%
Cumulative WACC
0.9
0.8
0.71
Present Value
12411
1187
1259
Valuing the cash flows to capital under the KKR's plan (interest tax shields in WACC)
Cash Flows Available for
Capital Payments
3732
3521
After tax cash interest
1682
1388
Cash Flows Available for
Capital
5414
4909
WACC
11.50%
11.70%
Cumulative WACC
0.9
0.8
Present Value
4854
3941
a
b
c
d
e
f
1414
1112
2526
11.90%
0.72
1813
1996
1997
a
b
1998 Terminal Value
Total
2073
455
2551
434
2869
392
3253
302
3671
271
4075
171
4589
-14
2528
2985
3261
3555
3942
4246
4575
31337
14.10%
0.59
1502
14.20%
0.52
1553
14.30%
0.46
1484
14.40%
0.4
1414
14.60%
0.35
1349
14.60%
0.3
1286
14.60%
0.26
1209
8283
1282
781
1594
685
1946
561
1344
412
2797
232
3332
0
3666
0
2063
12.40%
0.63
1308
2279
12.50%
0.56
1284
2507
12.70%
0.5
1253
1756
12.90%
0.44
1220
3029
13.10%
0.39
1187
3332
13.30%
0.35
1151
3666
13.60%
0.3
1115
1740
1005
1983
872
2383
718
2832
532
3330
321
3956
14
4319
0
2745
12.00%
0.64
1758
2855
12.60%
0.57
1625
3101
12.80%
0.5
1565
3364
12.90%
0.45
1503
3651
13.10%
0.39
1442
3970
13.40%
0.35
1382
4319
13.70%
0.31
1322
21203
26882
8175
31550
31447
9628
30834
c
d
e
Less Debt Equity Value
Per Share
5204
15999
70
5204
263465
115
5204
25630
112
1990
1991
198
936
949
225
796
460
236
679
437
1708
774
432
1462
556
381
1345
555
380
0
3500
12680
0
2700
0
0
0
0
2993
3121
2299
3352
3414
2584
NOTE: Data for prebid strategy are from Exhibit 5; for the management group strategy fro Exhibit 6 and for KKR's strategy fro
(a)
terminal values are calculated as perpetuities of the 1998 value without growth using a 14.6% discount rate
(b)
Calculated using a 14.6% discount rate
1992
1993
1994
1995
1996
1997
235
642
402
224
449
353
2
37
289
156
274
212
139
166
119
88
7
0
-7
0
0
0
0
0
930
572
389
738
586
396
735
598
402
735
618
412
735
636
422
735
658
432
735
678
442
5034
4644
3024
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3632
3639
2891
2924
3895
3118
4228
4162
3357
4560
4453
3621
4925
4771
3910
5326
5120
4229
5761
5501
4580
39458
37678
31367
Present value(b)
970
2800
2130
6957
4367
2836
0
5110
11064
29385
29096
23134