SWOT Analysis Federal Express

Equity Research Transportation
IWANOWYCZ, KAYLO, LEE, SEKINE, & WELLS
CORNELL EQUITY RESEARCH December 5, 1999
Federal Express (NYSE:FDX) SELL

Target: $30
“It is not going to happen overnight!”
Date: December 3, 1999
Current Price: $41 15/16

52 week Price Range: $32 – 61 7/8
Dividend Yield: 0.0%

Proforma LTD: $3.8 billion
Combined Market Cap: $12.2 billion

Pro-forma shares o/s: 298.6 million
Shares Short at 9/08/99 8.88 million
Short Ratio 5.42 days
Average Volume 2.0 million
Fiscal Year End: May 31
Institutional ownership: 65.25%
Consensus Estimate 05/99A 05/00E 05/01E
EPS $2.10 $2.17 $2.52

Company Description P/E 20.0x 19.3x 16.6x
FDX Corporation is a global transportation and logistics enterprise Growth Rate: 12%
that offers customers a one-stop source for global shipping, 12-Month Price Target: $30 (14 X FY00’ EPS)
logistics and supply chain solutions through its subsidiaries FDX,
RPS and others.
Valuation
Investment Thesis
DCF Valuation: $48
The outlook of FDX is at best uncertain. We believe that there are EBO Valuation: $22
threats on all fronts: G-Model valuation: $43
• E-Mail is reducing the amount of overnight package EVA Valuation: $42
activities
FDX appears to be overvalued in comparison to the current stock
• Unclear strategy to deploy FDX’s ground transportation market valuation.
division
• Low single digit domestic growth Comparables Analysis: With respect to P/E ratio, Price to Sales,
• International growth promising, but needs a successful track and Price to Cash Flow, FDX is overvalued in comparison to
record industry averages.
• Unclear visibility into FDX’s execution strategy and product
pipeline
• Current investments yielding lower than cost of capital
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December 5, 1999
Investment Thesis
• E-Mail is reducing the amount of overnight package activities
Electronic mail has become a popular method of transmitting personal information. We believe that such
transformation will begin to emerge in commercial document delivery. Increasingly, commercial
documentations will be sent electronically. This evolutionary shift in information delivery can potentially
reduce the demand for the company’s core overnight products.
• Unclear strategy to deploy FDX’s ground transportation division

UPS is the Godzilla of Ground Transport with a current market share over 75%. In addition, UPS has the
density of labor and networks to deliver ‘business-to-residential’ products. FDX will need to significantly
build brand recognition as a viable ground transportation competitor and build the labor force in order to
measure up to the Godzilla of Ground Transport. In the near term, we expect that FDX may not achieve
market share improvements with this product. We foresee diminishing market share as UPS aggressively
postures to maintain and improve its market share. Should there be significant improvements in this area,
we may be inclined to review the existing recommendation.
• Low single digit domestic growth

The domestic market is currently viewed as mature and we expect market growth of 3 to 4% annually. The
market is composed primarily of Priority and Standard overnight packages. Historical year-over-year
growth in FedEx domestic business has been, on average, 12%.
• International growth promising, but need successful track record

We believe that both international sectors can now grow in tandem. As Asia continues to recover and the
company deploys the new $200 million hub in Paris, we expect to see an enhancement of FedEx
international revenues. In the near future, we expect FedEx’s international revenue growth to be between
15 and 20%. Although such expected growth figures are high, the related base volume is low.
• Unclear visibility into FDX’s execution strategy and product pipeline

Although there are trademarked services and products in the pipeline, it is not clear that FDX has deployed
a coherent business locomotive to deliver shareholder value.
• Current investments yielding lower than cost of capital

FDX’s weighted cost of capital (WACC) is approximately 8.5%. Assuming a return on invested capital
(ROIC) in the 6.5% range, the company is not earning its cost of capital and, hence, firm value is being
destroyed. In other words, no economic value is added through operations unless FDX improves its
profitability.
Investment Summary
In light of our analysis and our bearish assessment of the company’s future revenue stream, we believe tha
through increasing efforts and costs, FDX will continue to build momentum to maintain its current level of
domestic air and freight business. As much as we are cognizant of FDX’s improving business in Asia and
it is expanding network deployment in Europe, we would like to observe concrete product developments
and execution strategies before adjusting our estimates. Any of the following may be signals for
improvement:
• Predictable revenue stream on all fronts with recurrent growth level above 12%
• Visible synchronicity on all fronts: domestic and international
• Adequate management guidance into the depth of its product development pipeline
• Visible deployment of strategies through joint ventures and partnerships with ground transport
companies
• Acquisition or joint venture deployments with Internet-enabled electronic documentation companies or
partners
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December 5, 1999
Table of Contents
I. Industry Analysis
Industry Characteristics 4
History 4
Industry Outlook 5
Market share Analysis 6
Competitive Forces 6
Challenges 7
II. FDX: A Company Profile

Company Business and background 8
Business Segments 8
Management 9
SWOT Analysis 10
Brand Strength 10
II. Stock Price Performance

Overview 11
Volume and Price Momentum 12
Relative Performance 12
Insider Trading 12
Institutional Ownership 13
Short Interest 13
III. Financial Analysis

ROE Decomposition 14
Profitability 14
Asset Efficiency Analysis 14
Cash Flow Analysis 15
Altman’s Z-score 15
Liquidity and Solvency 16
IV. Accounting
Financial Position 17
Review of Accounting Policies 17
Beneish Test for Earnings Manipulation 18
V. Valuation
Cost of Capital and Cost of Equity Analysis 19
Analysis of Expected Company Growth 19
EBO Analysis & Sensitivities 19
DCF and EVA Analysis 19
Comparables Valuation 20
StockVal G-Model 20
VI. Exhibits 21
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December 5, 1999
Industry Analysis
Industry Characteristics
• The airfreight industry concentrates on the highest value, most time-sensitive

Falling costs, manufactured goods moving long distances. Historically, this has been
increasing volume documents, small packages, and cargo that require overnight delivery. As costs
have fallen, this has opened the doors for an increase in lower value and heavier
manufactured goods to be shipped by airfreight.
• The air freight industry consists of carriers that are known as integrators, who
logistically manage a network of air and ground transportation (e.g. trucks and
airplanes) in order to deliver items door-to-door.
• Since FDX also competes in the second day ground services through an
acquisition of RPS, the company must also be analyzed in the ground integrated
ground transportation segment. UPS is the dominant player in that segment.
• Heavy air cargo shipments tend to average between 200 and 300 pounds, or less
than a typical LTL motor carriage shipment. Air express package shipments tend
to average three to five pounds. The items weighing less than two pounds tend to
be documents.
• The line between ground and air transportation is blurring. It is difficult to

Movement compare FDX to all competitors in the transportation sector due to the “door to
towards door” nature of the business. FDX competes in the “airline” sector as well as the
integration of “transportation – air freight” sector. Due to industry trends moving towards cost
ground and air cutting and the introduction of new, faster ground transportation services, FDX
transport has competitors in the ground transportation sector.
Even though certain analysts believe that a 7.4% improvement in profits can be
achieved in 1999, it is not clear whether this pertains to the “door to door” sector of
the air express industry. Since there will be downward pressure on the top line
revenues of integrators to switch to ground transportation, this could conceivably only
be in the air freight segment and not extend to the air / integrator segment.
History
Largest venture Late 1960s Fred Smith, a Vietnam veteran, presented FDX’s business concept
capital endeavor in a Yale term paper. He received a “C”.
in history (at that 1969 – 1971 Smith raised $40 million in investor funds, $8 million in family
time) money & $90 million through financing
1973 Service started to over 22 US cities with overnight delivery
1974 UPS strike, competitor REA Express went bankrupt
1978 UPS went public
1986 UPS loses $300 million on Zapmail, satellite based network
providing 2-hour document delivery
1987 FDX bought Island Courier Companies, Cansica, and three
Japanese freight carriers
1988 FDX bought Tiger International for $880 million, doubling
overseas revenues and becoming the #1 air cargo company
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December 5, 1999
1991 FDX introduced EXPRESS freighter, an international air-express

cargo service
1992 FDX scrapped its loss-making European domestic pickup and
delivery service
1993 FDX pilots ‘rock the boat’ by announcing their decision to
unionize; touching off protracted negotiations.
1994 FDX became the first US express carrier with direct flights to
China, and created Latin America and Caribbean divisions
1995 FDX introduced InterNetShip, a service allowing users to print
their own shipping labels and communicate with recipients via e-
mail, and a software package called BusinessLink, which allows
businesses to sell goods over the Internet
1997 FDX announced plans to create a hub at Charles de Gaulle Airport
in Paris (its first hub in Europe) and another in Miami (to drive its
expansion into Latin America).
Industry Outlook
Downward top-line growth:
• Domestic growth is slowing. The airfreight portion of the transportation sector which includes
everything from lightweight packages to heavier manufactured goods, is entering a slower phase
within a long-term secular boom. Results for the air freight portion of the transportation sector,
including lightweight packages to heavier goods, is entering a slower short-term phase.
• Downward Pressure on the Air Express segment in favor of ground transport. New services, such as
deferred delivery and existing services offered by ground transport, are encroaching into FDX’s piece
of the pie. Also, within a 600 mile radius (the distance a truck can travel in a day), people are opting
for ground transportation, since the ground transportation companies are now guaranteeing delivery in
as little as one day and as much as four days. The pricing of ground transportation is much more
competitive than that of air. Further compounding this pressure on air express companies is the trend
of suppliers and distribution centers locating hubs within the 600-mile radius to the more populated
retail centers.
Top-Line Growth:
• Industry studies show “Long Term growth promising”. The long-term prognosis has promise, with
domestic airfreight expected to grow by 5.7% annually through 2002. (Reference: MergeGlobal,
Arlington, VA). However, we believe growth will be around 2-3% on the conservative side. We want
to aggressively look to signals that may identify growth opportunities.
• New sources of Income. Outsourcing and inventory reduction efforts will create markets through
which suppliers’ ship to third parties who will manage inventory and then ship to the destination,
creating a new shipping leg for product delivery. We believe that this will benefit the ground
transportation segment contrary to what the airfreight industry had touted.
Cost reduction:
• Continued efficiency efforts. Investments in larger wide-body aircraft will lower the per unit costs
(could be as much as 15% depending on current aircraft mix, thereby opening the door for new classes
of larger, heavier package transport.
Cost Increase Pressures:

• Labor Issues. In the air freight industry, aircraft pilot wages represent 10% of total costs. The
industry faces constant pressure to improve labor wages, benefits and working conditions, while the
experiencing competition and profit margin pressure. The recent surge in the need for ground
transportation is being strained by a shortage in truck drivers, driving up trucking salaries. The
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December 5, 1999
constant threat of strikes is also a concern in the industry. UPS’ 15-day strike affected the company’s
revenues and earnings significantly.
• Cost increases. All fleets must be upgraded to meet Stage Three noise standards, which will
necessitate upgrades to existing aircraft (estimated at $100 million in 1999) and/or retirement of
existing planes and purchase of newer quiet engine planes.
Market Share Analysis

Defining the US Air Express market as Domestic Overnight and Domestic Deferred, the revenue for the
total market is estimated to be approximately $34 billion. FDX derives 56% of their revenues from this
market and UPS derives 29% of their revenues from this segment of the market. While we estimate that
FDX controls about 28% of the domestic express airfreight market by volume, UPS only controls about
18%. Airborne maintains approximately 10%.
Airfreight accounts for $25 billion, which represented approximately 5.6% of the US commercial freight
transportation market in 1997. Of the $25 billion, $20 billion was from the movement of domestic freight
and $5 billion was generated by US based air carriers through the movement of goods to or from the United
States. The airfreight / air cargo industry consists of air carriers, forwarders, and passenger airlines that
transport freight as a by-product. In addition to the $25 billion above, an additional $15 billion was
generated by integrators and forwarders handling international cargo.
Domestic Ground, consisting of non-express packages, is considered to be a $17 billion market. UPS
controls about 75% of the market and RPS, which is a subsidiary of FDX, controls about 11% - 12%. UPS
and RPS derive approximately 54% and 11%, respectively, of their revenues from this market.
Competitive Forces
Competitive Landscape:
• Main Competitors. Federal Express is the largest integrated airfreight carrier, with domestic
revenues of $10.3 billion in 1997. UPS, which is the largest transportation. UPS, which is the largest
transportation company in the US, derives some $6.3 billion from domestic air freight/express services.
While the industry can be characterized by two major players. Other important competitors
constituting the competitive fringe are: Airborne Express, DHL Worldwide, and Emery Worldwide.
• On the International front. Freight forwarders dominate the international market. Even though some
companies are integrators domestically, they are only forwarders internationally.
• Forwarders. There are approximately 2000 competitors, which are classified as forwarders. They do
not own or lease aircraft and many do not own ground transportation either.
• Super-regional LTLs. Also, the local LTLs (less than truck load carriers) are banding together to form
super regional partnerships that extend their ground delivery over larger areas with more efficient
cargo utilization and better coordination.
Rivalry Among Competitors:

With trucking routes extending 600 miles in a day and improved information systems and logistics
management, UPS service is extending its ability to provide shorter service. Additionally, truckers are
forming super regional alliances extending their organized delivery effort. There is additional competition
from UPS, who is guaranteeing ground transportation service that rivals FDX.
In the international arena, since there is expected to be more growth than in the US, domestic competitors
are also implementing global and multi-national strategies. UPS announced in November, 1999 that they
plan to build a European network, obtain airline authority to operate in Asia and build its market presence
in Latin America. UPS is already in 200 countries and territories.
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December 5, 1999
Excitement over the UPS initial public offering caused the stock price to rise from its initial price of $50 to
$70 ½ after the first week of trading. With employees (38% of the company) owning 90% of the multi-
billion company, the company has built-in incentives to employees. With 62% of the company left to
watch from the sidelines, this may backfire in the area of labor negotiations
Challenges
Bargaining Power of Buyers: Diversion of Cargo from air to ground
There will be a continued “squeeze” on profit margins as buyers (companies and individual consumers)
switch to ground transportation services for less time sensitive deliveries.
Threat of Substitutes:
• E-commerce Opportunities. The small package segment of Internet ordering/shipping is likely to be
through UPS and The US Postal Service. Some industry observers think that there will not be an
appreciable increase in business due to e-commerce, since it is just a “shifting” the form of transport,
but really no new net demands were created.
Type of Opportunity Timeframe Expected Growth Reference

Business to Business 1998 – 2003 $43 B – 1.3 Trillion
Business to Consumer 1998 – 2003 $ 8 – 108 Billion
Total electronic commerce 1998 $ 13 Billion BCG Consulting
Total electronic commerce 1998 $ 5 Billion Market Corp
Total electronic commerce 1998 $ 7.8 Billion Forrester Res.
We believe there is a perception that FDX is an expensive way to send low value items. Most of the
growth in internet retailing has been in the form of low price items such as books, CDs, computer
accessories and software. Consumers are opting for 2 to 3 day deliveries weighing the cost of the article as
a benchmark against the price of the shipment. UPS has benefited the most from this since they are
positioned as the leader in the ground transportation segment.
• Broad band. We strongly may pose a significant long-term threat to FDX’s core competency, which is
the delivery of 5 pound or less documents. We think that this threat is propelled by the close to
lightning delivery speed of the Internet. Email has already begun to drive toward the obsolescence of
transferring some information physically through delivery services. However, there are still some
documents that are more difficult to transmit (timeliness, speed, quality, priority of electronic mail,
etc.). The mode of delivery is still relegated to physical delivery because technology hasn’t made its
electronic transfer seamless and easy. However, in the future where broadband technology will be
pervasive, this created the biggest threat to FDX’s existing business package service. Initially,
broadband will be available between large metropolitan areas.
• Security and Encryption Technology. Legal documents, such as real estate contracts, and business
documents require signatory and notary functions to certify the legality of the instruments. These
documents are still transmitted physically, however, as security and encryption functions are improved
and gain confidence and are widely accepted, this will also serve as a threat to existing
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December 5, 1999
FDX: A Company Profile
Company Business and Background

FDX is the world’s largest express transportation company. Revenues in fiscal 1999 were $14 billion and
the first quarter of fiscal 2000 was $3.6 billion. There are more than 148,000 employees worldwide,
serving 210 countries and 366 airports worldwide, with 643 aircraft. The ground vehicle fleet numbers
43,500 worldwide. The distance driven totals approximately 2.7 million miles in the US alone. There are
34,000 drop boxes, 2400 FedEx shipping sites and 7600 authorized shipping centers. The average package
volume amounts to approximately 3.1 million packages daily, weighing in at 25.6 million pounds annually.
Average daily freight volume is about 7 million pounds per day. This level of business generates more than
500,000 daily calls and 63 million daily electronic transmissions
Business Segments
FedEx Domestic The domestic market is currently viewed as mature and we expect market growth
at 3-4% on an annual basis. This market is composed primarily of the primary
Growth slowing products: Priority and Standard overnight packages, which also includes US
freight products. Historical year-over-year growth in FedEx domestic business
has been in the teens.
1999 is expecting growth at a reduced rate of 6.8%. The reduced rate can be
attributed to the shift from air to ground shipping preferences, the improvements
in ground transportation, such as swifter and shorter delivery routes, and the
more successful deployment of UPS ground products. (See Market Forces and
Competitive Landscape sections above for an exposition on FDX’s core
competency – the overnight delivery product)
FedEx International FedEx has spent much effort and capital to build its network of partners and
operations in both Europe and Asia. FedEx launched EuroOne in the late 80s
Opportunities for and AsiaOne in the mid- 90s. Although, FedEx has always operated much more
growth in the mid profitably in its domestic operations than its international operations, when
teens FedEx enters a new region of the world, it often takes several years before it
builds critical mass. The success of EuroOne has been overshadowed by the
launch of AsiaOne and also the most recent crisis in Asia.
However, we believe that both international sectors can now grow in tandem, as
Asia has begun its reversal of fortunes and the company has initiated the
deployment of a new $200M hub in Paris, which will greatly enhance FedEx
international revenues. We expect FedEx’s international revenue to grow at mid
to high teens in the near future. Even though the expected growth figures are
high, the existing base volume is low.
RPS FDX acquired RPS in January 1998. RPS is in the ground, non-express
business-to-business delivery of parcels weighing less than 70 pounds. RPS’s
Gargantuan obstacles share of the estimated $18 B total ground market is currently estimated at 11%.
to catch up to UPS, the In July 1999, FDX began its deployment of RPS, thereby taking steps to address
Godzilla of Ground FDX’s poor share of the business-to-residential market. Although we believe
Transport there is opportunity in this market, we believe FDX has major hurdles ahead.
UPS is the Godzilla of Ground Transport and has over 75% market share. In
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December 5, 1999
addition, UPS has the density of labor and networks to deliver products business-
to-residential. FDX will need to significantly build brand recognition as a viable
ground transportation competitor, as well as build the labor force to measure up
to the Godzilla of Ground Transport. In the near term, we estimate that FDX
may not achieve market share improvements with this product and foresee some
diminishing market share as UPS aggressively postures to maintain and improve
its market share. Should there be significant improvements in this area, this may
be a signal to review the existing recommendation.
Viking and We expect FDX to sell these two operating units. Thus we will exclude these
Roberts/FDX two units from our discussion.
Logistics
The growth trends mentioned above are shown graphically in the chart shown below. The categories are
further defined below:
• Previous – Fiscal Year Ending May 1998, Actuals
• Current – Fiscal Year Ending May 1999, Actuals
• F1 – Fiscal Year Ending May 2000
• F2 – Fiscal Year Ending May 2001
2 0 .0 %
1 8 .0 %
1 6 .0 %
1 4 .0 %
1 2 .0 %
1 0 .0 %
8 .0 %
6 .0 %
4 .0 %
2 .0 %
0 .0 %
D o m e s tic I n t e r n a t io n a l R PS
P r e v io u s 1 7 .6 % 1 2 .3 % 1 9 .0 %
C u rre n t 6 .8 % 6 .1 % 1 1 .1 %
F1 4 .9 % 1 2 .4 % 1 0 .9 %
F2 4 .3 % 1 5 .4 % 9 .8 %
P r e v io u s C u rre n t F1 F2
(See Exhibit 4 for detailed projections)
Management
The most recent CEO, Tom Weise, who was at Fred Smith’s (the founder) side from the beginning,
recently announced retirement. This paves the road for the current COO, to take the realm. The new COO
has significant international office leadership experience, as well as having had responsibility for sales.
This is another visible signal that the company’s focus is on international expansion and is looking to
leverage e-commerce to build, maintain and obtain new client relationships.
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December 5, 1999
SWOT Analysis: Strengths, Weaknesses, Opportunities and Threats
Strengths Weaknesses
• FedEx is secular brand • Significantly smaller ground market share than
• Largest market share in airborne service UPS (75%): 11% domestic through RPS
• Superb service: 99%-Plus on-time service level • B2E strategy did not live up to management’s
• First in using the WWW: tracking products in prediction: consumers chose ground instead of
transit air freight products
• One-stop shopping • High level of debt to service
• Unpredictability in FedEx’s operating model:
Quality of Earnings concerns
Opportunities Threats
• Cross marketing existing FedEx and RPS • UPS is gaining ground on the domestic air
products freight market share
• Increasing ground freight activities in the B2B • Increasing jet fuel prices: trend will continue
business • Broadband and internet: email and online-
• The strong network in Asia through AsiaOne: security may lessen the need to courier
the nature of the geography in Asia may benefit overnight deliveries: electronic signatory
FedEx core competency, air freight; for fiscal • Emerging potential threat: non-asset based
2000, potential 100% growth opportunity online providers: Expeditors, Circle, Eagle, CH
• Air freight to grow 2x-3x in the next twenty Robinson, Hub Group (online freight matching
years: 3.52% - 5.64% annually companies)
• Growth of global business economic and • Rising interest expense: although this can be
enterprise service somewhat mitigated by fixed debt expenses
• First international mover advantage in China (operating cash requirements and stock
• Global supply chain services repurchase plan)
• Domestic growth is projects to grow at very
low single digit rate
• Growing Airborne and European contenders
not too far behind
• UPS as an alternative investment choice for the
investment community
Brand Strength
Oldest and foremost air express brand, Federal Express, also known as FedEx or FDX
When you think overnight delivery, you think “FDX”. The brand is synonymous with quick, reliable
delivery. The brand is also well known by the public for being able to track your package via the internet
from source to destination, adding another element of customer service and window into the business.
RPS ground transportation brand not well known

FDX will struggle to create a brand in RPS that can be compared to the overwhelming dominance that UPS
has (75%) in the express ground delivery segment. People today think of FDX as a premium brand, that
under the right set of circumstances, one would pay a higher cost for overnight door to door service. FDX
is thought of as the costlier alternative, therefore, one does not
New Supply Chain Logistics Products and Business Building Products

These products have been introduced as a means to allow FDX customers to link their existing information
systems to FDX’s formats and provide tools for FDX’s customers to communicate delivery to their
customers. The product brand names are as follows: InterNetShip (track all orders via an FDX account,
Shipping applications (Ship API, Track API, Direct Link), Express Bridge (tell your customers when
they’ll have their order)
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December 5, 1999
Even though there are trademarked services and products in the pipeline, it is not clear that there is a
coherent business locomotive that delivers shareholder value.
Stock Price Performance

Performance/Analysts’ opinions
Overview
Oct 98 Dec 98 Sept 99 Oct 99

Analyst Meeting Barrons article Share Disappointing
(1ST called by FDX in on e-commerce Buyback Quarterly
6 years) Earnings
Events and Impact on Performance

The FDX stock has seen a dramatic rise and a fall since October 1998, when the company hosted a well-
attended investor meeting. Expectations started to build on cash flow improvement and e-commerce
potentials. Then an article appeared in Barron’s in December 1998 discussing that FDX is going to benefit
from e-commerce and should command much higher valuation just as the Internet companies do. This
report turned out to be rather premature, as the primary benefactor of the rapidly growing e-commerce is
the standard ground shipping company UPS with its business-to-residential coverage. FDX, on the other
hand, is focused on business-to-business market, which can be more lucrative in the future but has not yet
greatly benefited from the e-commerce trend. The direct comparison against UPS, which became public
last month, will be unfavorable to FDX and will likely keep its stock price under pressure until the market
starts to impound higher revenue growth in Europe.
Capital
Contrast to the previous three years when a small amount of shares were issued, FDX has aggressively
moved into a share buyback program, which was announced in September 1999. The board approved 15
million shares, or approximately 5% of outstanding shares, to be repurchased. It is estimated that the
company has completed about 60% of the whole program during late September and early October at an
average price of $40.56, leaving 6 million additional shares to be bought back. In addition, there is an
expectation that the company is likely to apply the selling proceeds from two asset sales in February 2000
to implement additional stock buyback for 3% of the outstanding shares. These repurchases are typically
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December 5, 1999
interpreted positively, as it sends a signal that the management believes the stock is undervalued. Some
analysts argue, however, that the company may not be making the best capital allocation decision since the
money may be better spent to pay down debt.
According to the four ratios that James O’Shaughnessy advocates as useful measures for stock evaluation,
FDX appears to fall into the category of stocks that are more likely to appreciate in the future. Profit
margins and ROE, where FDX has shown improvement, are said to be of little use in stock analysis, as
these factors are already impounded in the share price.
Volume and Price Momentum

Earlier in the year, for about a six-month period, the geometric rise in FDX’s stock price was pure Internet
hype, initiated by the Barron’s article and the subsequent avaricious appetite of the investment community
to identify the next business-to-consumer Internet play. After doubling the stock price within the same
period, the ludicrous rise was guillotined by an earnings warning. Further, reports surfaced that FDX
would not stand to gain as much from business to consumer fueled the charred stock price with more
oxygen. The stock currently trades within a narrow band between $36 to $46, leaving no clear
prognostication of a directional momentum. Aside from noise traders, we believe the investment
community is eagerly awaiting 2QF99 results to substantiate the next positioning. We believe there will be
tremendous negative price momentum if FDX fails to meet expectations.
Relative Performance
Chart – Performance Relative to the S&P500
Insider Trading
According to Vickers Institutional Research, there was only 1 insider trade over the previous 6 months: a
purchase of 1000 shares. Since there isn’t a lot of insider trading, one can not draw any conclusions about
whether management is “bearish” or “bullish” on the stock.
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December 5, 1999
Institutional Ownership
Institutional investors currently own 65.25% of the 194.819 million shares outstanding. This doesn’t
appear to be an inordinate amount of institutional investment. Purchase activity for the last three months is
delineated below:
• 3 Month Net Purchased - 14.710 million shares

• 3 Month Shares Purchased 34.593 million shares
• 3 Month Shares Sold 48.764 million shares
Short Interest
The number of shares for which there exists a short interest increased from August through November as
detailed in the following chart. The increase in short interest indicates the possibility that investors feel that
the stock may be overvalued.
Month Shares % Outstanding % Float Days
11/08/99 8.884 2.976 3.234 5.424

10/08/99 6.355 2.129 2.313 2.370
09/08/99 3.419 1.145 1.245 1.973
08/09/99 3.220 1.078 1.172 2.067
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December 5, 1999
Financial Analysis
ROE Decomposition
ROE Decomposition
FDX has registered higher ROE for the past three years mainly through profit margin improvement. The
double-digit ROE, however, has been supported by the financial leverage, which remains fairly high
compared to its peers in the industry.
ROE Decomposition
1999 1998 1997
Profit Margin 4.11% 3.60% 1.71%
Asset Turnover 1.65 1.69 3.15
ROA 6.78% 6.11% 5.40%
Financial Leverage 2.16 2.21 2.08
ROE 14.64% 13.48% 11.20%
Overall Profitability
FDX has improved its profitability on various measures over the past three years as the table indicates.
This trend needs to be carefully observed, however, as lower fuel costs have contributed to the margin
improvement. The largest expense item is salaries and employee benefits, which are likely to edge up, as
the labor market remains tight.
Profitability Analysis
1999 1998 1997
Gross Margin 30.47% 30.04% 28.39%
Operating Margin 6.93% 6.82% 5.14%
Profit Margin 4.11% 3.60% 1.71%
Asset Efficiency Analysis

Despite the improvement in profitability, FDX has so far not been able to increase its efficiency in asset
utilization. In fact both A/R turnover and PP&E turnover have slightly deteriorated over the past three
years. As it plans to enhance its infrastructure, especially in the international markets, these turnovers may
continue to be sluggish.
Asset Efficiency Analysis

1999 1998 1997
Inventory Turnover 35.52 31.54 36.32
A/R Turnover 8.19 8.31 9.04
PP&E Turnover 1.28 1.33 1.42
Inventory Turn-Days 10.28 11.57 10.05
A/R Turn-Days 44.57 43.94 40.37
14
December 5, 1999
Cash Flow Analysis

Because FedEx merged with Caliber, a ground transport company, to form FDX in 1996, it is difficult to
compare the cash flows for FDX before 1996. As a result, we are showing the information for the Cash
Flow Analysis from 1996 to the present. The composite graph shown below is characteristic of a company
in the more mature phase of the company lifecycle curve (introduction, growth, maturity, decline). The
company generates sufficient cash flow from operations, such that it is not as dependent on the capital
markets.
Chart – Sources and Uses of Cash Flow
2,000,000
1,000,000
0
1996 1997 1998 1999
-1,000,000
-2,000,000
CFO CFI CFF
Cash Flow from Operations (CFO)

FDX has consistently generated a positive cash flow from operations since forming the newly merged
company, FDX. Despite its slight decline in cash flow from operations from 1996 to 1997, FDX was able
to rebound in 1998 with a 45% increase in CFO. Even though trends in the industry reveal increased
margin pressure, FDX’s margins improved by 7.8% during the fiscal year ending 1999.
Cash Flow from Investing (CFI)

Cash flow from investing has typically been between $1.45 and $1.47 billion. This number is primarily
influenced by changes in investments in property, plant and equipment. Between 1997 and 1998, FDX
cash flows from investing were between $1.76 and $1.88 billion. This represents a 23% increase in
investment over 1996 levels of $1.35 billion.
Cash Flow from Financing (CFF)

Over the past year, the company has been generating a higher cash flow from operations and as a result,
employing the excess cash to pay down debt. No new debt was issued in fiscal year ending 1999. Also in
1999, the company issued $50 million of new equity. Assuming that the stock was priced at an average of
$50 per share, this stock issuance represents approximately one million shares: a relatively minor issuance.
In 1998, the company issued new debt (less than in 1997), but also paid down twice that amount of debt
that it borrowed. The company may have reduced its debt level in response to the fact that it is more highly
leveraged than its peers. FDX may also be becoming more sensitive to investor concern over its high debt
burden.
Altman’s Z-Score
Although we do not believe that FDX is in danger of bankruptcy, we ran Altman’s bankruptcy predictor
model for completeness sake. The model predicts bankruptcy when the Z score is less than 1.81. The
range between 1.81 and 2.99 is considered a gray area. Altman’s Z-score model is as follows:
15
December 5, 1999
Z = 1.2(X1) + 1.4(X2) + 3.3(X3) + .60(X4) + .998(X5)
Where X1 = net working capital/total assets

X2 = retained earnings/total assets
X3 = EBIT/total assets
X4 = shareholders’ equity/total liabilities
X5 = sales/total assets
FDX 1999 Financials FDX Z-Score

Net working capital = $116,302 2.89
Total assets = $10,648,211
Retained earnings = $3,615,797 The score for Fedex falls into the gray
EBIT = $1,163,086 area or the “zone of ignorance”. This may
Shareholders equity = $4,663,692 be something to watch more closely
Total liabilities = $5,984,519 especially if Fedex does not meet its
Sales = $16,773,470 revenue target goals.
Liquidity & Solvency
FDX does not have any apparent liquidity problem. While leverage ratios have come down over the past
couple of years, coverage ratios have improved. The company clearly changed its financing policy after
1997, gradually moving from debt towards equity financing. This is in line with the increase in operating
cash flow for the same period. The overall debt level, however, still remains much higher that of
comparable companies and could potentially hurt the future profitability if interest rates continue to move
higher movement.
16
December 5, 1999
Accounting
Financial Position
FDX Corporation maintains a healthy balance sheet. As of May 31, 1999, the company had $325 million
in cash, $2.15 billion in net receivables, and long-term debt of $1.36 billion. In 1999, while total assets
increased by 10%, long-term debt decreased by 2%. Debt to total capitalization has dropped from 33% in
1997 to 23% in 1999. Operating performance has also been strong: for the 1999 fiscal year, annual
revenues increased 6%, margins improved from 6.4 to 6.9%, and net income rose 25%.
Review of Accounting Policies
• Fiscal Year: The Company operates on four, three-month quarters with a fiscal year ending May 31.
• Revenue Recognition: Revenue is recorded based on the percentage of service completed for
shipments in transit at the balance sheet date.
• Consolidation: The consolidated financial statements include the accounts of FDX Corporation and its
subsidiaries. All significant inter-company accounts and transactions have been eliminated.
• Property and Equipment: While ordinary maintenance and repairs are expensed as incurred,
expenditures for major additions, improvements, flight equipment modifications, and certain overhaul
costs are capitalized. Depreciation and amortization of property and equipment is provided on a
straight-line basis over the asset's service life or related lease term as follows:
Flight equipment 5 to 20 years

Package handling and ground support equipment and vehicles 5 to 30 years
Computer and electronic equipment 3 to 10 years
Other 2 to 30 years
Aircraft airframes and engines are assigned residual values ranging from 10% to 20% of asset cost. All
other property and equipment have no material residual values. Vehicles are depreciated on a straight-
line basis over five to ten years.
• Deferred Gains: Gains on the sale and leaseback of aircraft and other property and equipment are
deferred and amortized over the life of the lease as a reduction of rent expense.
• Deferred Lease Obligations: Rent expense on certain of the Company's aircraft and facility leases is
recorded on a straight-line basis over the lease term. Deferred lease obligations represent the
cumulative difference between rent expense and rent payments.
• Capitalized Interest: FDX capitalizes interest on funds used to finance the acquisition and
modification of aircraft and construction of certain facilities up to the date the asset is placed in
service.
• Spare Parts, Supplies and Fuel: Spare parts are stated principally at weighted-average cost; supplies
and fuel are stated principally at standard cost, which approximates actual cost on a first-in, first-out
basis. Neither method values inventory in excess of current replacement cost.
17
December 5, 1999
The Beneish Model for Earnings Manipulation

The Beneish model reveals that FDX is not likely to be an earnings manipulator. The M-score for the 1999
Five and Eight Variable models are –2.92 and –2.90, respectively. Since these numbers are less than –2.22,
the model suggests that there is very little chance that earnings manipulation occurred. A detailed analysis
of the components of the Beneish model follows:
• DSRI: Days Sales in Receivables Index. The Company allowed its net receivables balance to increase
at twice the rate of sales growth. Although manipulators typically reveal high DSRI values, we feel
that the increase is reasonable; especially in light of the fact that total assets increased by the same
percentage.
• GMI: Gross Margin Index. Gross margins increased from 6.4 to 6.9% during 1999. This results in a
GMI of .919 that lends to the premise that FDX is not likely to be a manipulator.
• AQI: Asset Quality Index. Since FDX did not yield a significant change in the level of soft assets,
AQI had very little impact on the Beneish calculation.
• SGI: Sales Growth Index. An SGI of approximately 1.115 and 1.057 in 1998 and 1999 respectively,
indicates that the Company’s sales have continued to grow, but at a slower pace. A high SGI points
towards moderate, controllable growth. Since the 1999 SGI is relatively moderate, the number does
not indicate potential manipulation by FDX.
• DEPI: Depreciation Index. FDX’s DEPI of 1.039 and 1.025 in 1998 and 1999 respectively, indicates
that the rate at which depreciation is slowing is moderating. This is consistent with the Company’s
strategy if continued investment. Additionally, the ratio is in line with the increase in the total level of
assets employed.
• SGAI: SG&A Index. Since SGA expense increased at a rate that exceeded the rate of sales increase,
the SGAI of .991 indicates possible manipulation. However, since the difference is only slight, we do
not see this as a red flag; especially in light of the other parameters listed above.
• TATA: Total Accruals to Total Assets. A TATA of –0.114 and –0.107 in 1998 and 1999
respectively, reveals that total accruals are relatively low. An earnings manipulator will typically have
high total accruals.
• LVGI: Leverage Index. FDX’s LVGI of 0.936 and 0.900 in 1998 and 1999 respectively, indicates that
the company is decreasing its debt level. Since these levels are low compared to known manipulators,
FDX does not appear to be influencing the numbers.
18
December 5, 1999
Valuation
Cost of Capital / Cost of Equity Analysis
FDX’s weighted cost of capital (WACC) is approximately 8.5% based on its cost of equity of 10.54% and
cost of debt of 7.22%. While the EVA model indicates much more optimistic figures for its return on
invested capital (ROIC), the market appears to apply a more moderate percentage. Assuming a reasonable
estimate of 6.5%, the company is not earning its cost of capital and, hence, destroying value. In other
words, there is no economic value added to the company’s operations unless FDX improves its
profitability.
This poses a serious concern as FDX continues to expand its international infrastructure. Although the
company has generated a healthy operating cash flow, any business slowdown may lead to a cash shortage
that may call for additional debt issuance. This would add to FDX’s already high debt levels, increasing
the cost of debt, thereby, the overall cost of capital.
EBO Analysis
The EBO valuation model revealed an implied price of $21.60, thus implying significant overvaluation in
the current financial markets. In arriving at our valuation, we used FirstCall analyst consensus earnings
forecasts of $2.17 and $2.52 for the fiscal years ended 2000 and 2001, respectively. As described above,
we based our model on a growth rate of 8%. We used a discount rate of 10.548%, calculated based on the
Air Courier SIC Code 1103. Based on historical data and industry analysis, we employed a Target ROE of
12%.
Sensitivity analysis: In order for the EBO to arrive at a valuation that is consistent with the market price,
one might consider one of the following scenarios:
• Decrease the discount rate to approximately 7.3%. A discount rate at that level would be unreasonable,
since the company has a cost of capital that is higher than 8.5%.
• Increase the Target ROE to 20.2%. In the Air Courier industry, all ROE’s tend to converge towards
12% over time. Since the company does not maintain a sustainable competitive advantage, anything
significantly higher would be completely unreasonable.
• Assume a long-term growth rate of 33%. Although such a rate may be attainable for certain companies
in the technology sector, it is certainly not feasible for an Air Courier company.
Tables depicting various combinations of these variables are provided in exhibit 1.
EVA and DCF Analysis

EVA Valuation
The EVA model calculates an implied price of $42 per share. The model measures the excess after tax
returns of invested capital over the weighted average cost of capital, discounted by the weighted average
cost of capital. Going forward, the EVA model assumes the best case conditions. We felt the ROICs were
fairly high in the model and even so, price the stock matched the current stock price. (Exhibit 2)
DCF Valuation
The DCF model came up with a price of $48 per share. We assumed a 8% growth rate for five years, then
trailing off to 3% for the next five years. The present value of the cash flows were discounted by the cost
of equity capital of 10.54% and we used a terminal value multiple of 16, the historic average high for
FedEx. When we ran sensitivity on the growth rate, we found that the more FedEx grows in revenue, the
19
December 5, 1999
less money they make in free cash flow. This is consistent with our earlier findings that the return on
equity is less than the cost of capital. (Exhibit 3)
Comparables Valuation
In performing a comparative market multiples analysis to determine FDX’s valuation with respect to its
peers, the company appears to be slightly overvalued.
Freight Ticker 52 52 Market Price Current Dividend

Integrators Symbol Price Hi Lo Cap. Earnings Sales Book CashFlow ROA ROE Ratio Yield
FDX FDX 41.938 61 7/8 32 12749 18.2 0.74 2.65 7.3 5.93% 14.88% 1.027 0
UPS UPS 66.625 76 15/16 61 76885 34.9 2.83 11.3 22.77 10.56% 26.26% 1.460 0.45%
Airborne Freight Corporation ABF 24.5 42 9/16 19 1/2 1206 10.7 0 0.39 4.37 9.58% 19.07% 1.308 0.65%
CNF Transportation CNF 30.562 45 7/8 28.38 1712 9.6 0.32 1.97 5.4 5.33% 16.17% 0.918 1.31%
Pittston BAX Group PZX 10.062 11 5/8 6 195 9.2 0.1 0.62 3.44 1.03% 2.32% 0.976 2.39%
High 76885 34.9 2.83 11.3 22.77 10.56% 26.26% 1.460 2.39%
Median 1712 10.7 0.32 1.97 5.4 5.93% 16.17% 1.027 0.65%
Low 195 9.2 0 0.39 3.44 1.03% 2.32% 0.918 0.00%
StockVal G-Model
FDX CORPORATION (FDX) 88
PRICE 41.9 DATE 12-03-1999 QR 4.0 NET 8.5%• 71
STOCKVAL® EPS Lagged 1-Year
57
45 45
36 36
29 29
23 23
19 19
15 15
12 12
10 10
8 8
6 6
5 5
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
THE G-MODEL First Call Data 2000 2001 2002 Normalized Earnings
IR 6.07 6.07 Mean Estimate 2.17↑ 2.52↓ NE FYE May
K 1.90 1.90 Change -5% +16% 2000 2.18
K' 1.00 1.00 High 2.30 2.70 2001 2.37•
NE 2.27 2.47• Low 1.87 2.10 2002 2.57
PE 18.5 17.0 Total 12 11 2003 2.79
WPE 18.8 18.8 # Up 2 0 2004 3.02
WP 43 46 # Down 7 5 2005 3.28
AP 2% 11% House Estimate 2006 3.56
Expected Return 1-Yr 11% PE Ratio 19.3 16.6 NE 2007 3.86
G-Model: Investors can do better elsewhere

The G-Model is a close approximation to the EBO model in that stock price reflects a forecast of next
year’s earnings. The Earnings per Share line is shifted back one year on the time scale. This aligns current
price and next year’s earnings to their normal market relationship. For FDX, the G-Model is shown above.
One change we made to the model was to change the slope of the EPS line from 10% to 8.5%. This line
represents the earnings growth or the price growth of FDX. In all of our other valuations, we felt that
even an 8.5% growth in earnings was the best case scenario. So we feel that this model is the best
representation of FDX’s best one-year outlook.
Looking at the data on the bottom panel on the left side of the graph are the G-Models theoretical values
regarding future and current pricing. At the very bottom we see that the expected one-year return is 11%.
The numbers following AP (Appreciation Potential) shows 2% and 11%. The 2% represents the amount by
which FDX may be currently undervalued while the 11% is the expected one year return. Above the AP is
the WP or Warranted Price. At the time this model was done, the price of FDX was $41.90 per share. The
WP suggests a price of $43 per share while the one-year target price is $46 per share. This suggests that
FDX is currently fairly priced. Above WP is PE (Price Earnings) and WPE (Warranted Price Earnings).
20
December 5, 1999
These ratios are also very close suggesting that the stock is fairly priced. The PE is the currently price to
earnings ratio and the WPE is the price to earnings ratio based on the existing G-Model settings. The other
values, IR, K and K1 represent the interest rate of the five-year Treasury bond, the equity market risk
premium and the company specific risk premium respectively.
What the G-Model for FDX suggests to us is that either FDX is fairly priced or just slightly undervalued.
In either case, investors seeking above average market returns would do well looking elsewhere.
21
December 5, 1999
Exhibit 1 – EBO Model

FDX
FDX Corp.

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EBO Sensitivity Analysis

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22
December 5, 1999
Exhibit 2 – EVA Analysis
WACC 8.50%
Forecast
1999 2000 2001 2002 2003 2004 2005 2006 2007
Earnings Before Interest and Taxes (EBIT) 1,163,086 1,105,036 1,193,439 1,288,914 1,392,027 1,503,390 1,593,593 1,673,273 1,723,471
Taxes on EBIT:
Add: Income taxes fromincome statement 429731 423,627 457,390 493,857 533,244 575,786 610,237 640,664 659,818
Add: Tax shield on interest expenses* 36,864 39,686 42,737 46,034 49,599 52,479 55,018 56,603
Less: Tax on Interest Income* 0 0 0 0 0 0 0 0
Less: Tax on non-operating income* 0 0 0 0 0 0 0 0
Less: Taxes on EBIT: 460,491 497,076 536,593 579,278 625,385 662,716 695,682 716,421
Add: Change in deferred income taxes 0 0 0 0 0 0 0 0
Add: Goodwill Amortization 0 0 0 0 0 0 0 0
Net Operating Profits After Taxes, NOPAT 644,545 696,363 752,321 812,749 878,005 930,877 977,590 1,007,049
Add: Depreciation & Amortization (except goodwill) 1,141,267 1,232,568 1,331,174 1,437,668 1,552,681 1,645,842 1,728,134 1,779,978
Less: Net Change in Working Capital 105724 10,591 20,434 22,069 23,834 25,741 20,850 18,418 11,603
Less: Net Other Adjustment -19337 0 0 0 0 0 0 0 0
Less: Net Capital Expenditures*** 1762979 953,525 1,173,875 1,267,784 684,604 1,423,976 1,153,420 1,018,854 641,878
Free Cash Flows to the Firm(FCFF) 821,696 734,623 793,642 1,541,979 980,969 1,402,448 1,668,452 2,133,546
Invested Capital = ICt-1 + It 1,849,366 2,493,911 1,660,479 1,946,630 2,102,602 1,586,443 2,380,594 2,151,861 2,044,322
EVA 487,349 696,363 752,321 812,749 878,005 930,877 977,590 1,007,049
PV of EVA 449,169 591,530 588,998 586,459 583,913 570,576 552,266 524,340
ROIC 35% 28% 45% 42% 42% 59% 41% 47%
Initial investment 1,849,366

Sum of EVA 10,686,689
Firm Value 12,536,055
Shares outstanding 297,987
Price $ 42.07
23
December 5, 1999
Exhibit 3 – DCF Analysis
24
December 5, 1999
Balance Sheet Input to DCF Model
25
December 5, 1999
Exhibit 4 - Growth Forecast
FDX Corp. - Growth Forecast

Domestic growth to be
sluggish
Revenues F1998 F1999 F2000E F2001E F1999 F2000E F2001E
FedEx Domestic 9,521 10,172 10,670 11,129 6.8% 4.9% 4.3%
FedEx International 3,590 3,809 4,281 4,941 6.1% 12.4% 15.4%
FedEx Total 13,111 13,981 14,952 16,070 6.6% 7.0% 7.5% International is the only
bright spot with double-digit
Caliber Total 2,595 2,794 3,126 3,452 7.7% 11.9% 10.4%
growth
Total 15,706 16,775 18,078 19,522 6.8% 7.8% 8.0%
Operating Expenses
FedEx
Revenue Growth
Salaries and employee benefits 5,774 6,225 6,662 7,173 Projected to be 8%
Rentals and landing fees 1,233 1,318 1,474 1,617
Depreciation and amortization 845 911 988 1,069
Maintenance and repairs 802 890 1,012 1,024
Fuel 709 594 768 808
Other 2,961 3,170 3,254 3,495
Total 12,324 13,108 14,158 15,186
Caliber 2,371 2,502 2,807 3,087
Total 14,695 15,610 16,965 18,273
Operating Income 1,011 1,165 1,113 1,249
26
December 5, 1999

SWOT Analysis Federal Express

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Equity Research Transportation

IWANOWYCZ, KAYLO, LEE, SEKINE, & WELLS

CORNELL EQUITY RESEARCH December 5, 1999

Federal Express (NYSE:FDX) SELL

Date: December 3, 1999

Current Price: $41 15/16

Dividend Yield: 0.0%

Combined Market Cap: $12.2 billion

Consensus Estimate 05/99A 05/00E 05/01E

EPS $2.10 $2.17 $2.52

• Unclear strategy to deploy FDX’s ground transportation division

• Low single digit domestic growth

• International growth promising, but need successful track record

• Unclear visibility into FDX’s execution strategy and product pipeline

• Current investments yielding lower than cost of capital

II. FDX: A Company Profile

II. Stock Price Performance

III. Financial Analysis

• The airfreight industry concentrates on the highest value, most time-sensitive

• The line between ground and air transportation is blurring. It is difficult to

1991 FDX introduced EXPRESS freighter, an international air-express

Cost Increase Pressures:

Market Share Analysis

Rivalry Among Competitors:

Type of Opportunity Timeframe Expected Growth Reference

FDX: A Company Profile

Company Business and Background

(See Exhibit 4 for detailed projections)

SWOT Analysis: Strengths, Weaknesses, Opportunities and Threats

RPS ground transportation brand not well known

New Supply Chain Logistics Products and Business Building Products

Stock Price Performance

Oct 98 Dec 98 Sept 99 Oct 99

Events and Impact on Performance

Volume and Price Momentum

• 3 Month Net Purchased - 14.710 million shares

Month Shares % Outstanding % Float Days

11/08/99 8.884 2.976 3.234 5.424

Asset Efficiency Analysis

Asset Efficiency Analysis

Cash Flow Analysis

Chart – Sources and Uses of Cash Flow

Cash Flow from Operations (CFO)

Cash Flow from Investing (CFI)

Cash Flow from Financing (CFF)

Z = 1.2(X1) + 1.4(X2) + 3.3(X3) + .60(X4) + .998(X5)

Where X1 = net working capital/total assets

FDX 1999 Financials FDX Z-Score

Liquidity & Solvency

Review of Accounting Policies

Flight equipment 5 to 20 years

The Beneish Model for Earnings Manipulation

Tables depicting various combinations of these variables are provided in exhibit 1.

EVA and DCF Analysis

Freight Ticker 52 52 Market Price Current Dividend

G-Model: Investors can do better elsewhere

Exhibit 1 – EBO Model

  

 . '7-     !% 1  1%1 1

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EBO Sensitivity Analysis

Exhibit 2 – EVA Analysis

Initial investment 1,849,366

. '7- !% 1 1%1 1

1 1 :% : % !"