Exihibit3

Proforma Results for alternate capital structures (1981)

($ millions except share price data)
Sales
EBIT
Interest
PBT
Taxes
PAT
Dividends Preference
Earnings Available to Common Stock
Dividends Common
Avr Common Stock (Millions)
EPS
DPS
Beginning of the year
Cash and Cash Equivalents
Total Debt
Net Worth
Common Stock Price
Agg Market Value

Actual 1981 30% Debt to Total Capital 50% Debt

4131.20
4131.20
4131.20
954.80
922.18
922.18
2.30
52.65
87.75
952.50
869.53
834.43
455.20
417.37
400.53
497.30
452.15
433.90
0.40
0.40
0.40
496.90
451.75
433.50
295.30
271.05
260.10
155.50
135.66
127.30
3.20
3.33
3.41
1.90
2.00
2.04

593.3
13.9
1472.8
30
4665

360.3
376.1
877.6

360.3
626.8
626.9

9.471383
Exihibit 4
Excerpts
Tax rate
Dividend Payout
Interest Rate Before tax
Interest Forgone
Details of Recapitalization

48%
60%
14%
32.62
30% Debt ratio

Exess Cash
Additional Debt
Total Repurcahse
ReductionCommon Stock

233.00
362.20
595.20
19.84

50% debt
233.00
612.90
845.90
28.20

70% Debt
4131.20
922.18
122.86
799.32
383.67
415.64
0.40
415.24
249.15
118.94
3.49
2.09

3176.40

360.3
877.6
376.1

6.469114 4.924459

70% Debt
233.00
863.70
1096.70
36.56

3.16201

Alternate Capital Structures

Debt Ratio
EPS
DPS
BVPS
ROE

Actual

30% Debt
3.20
1.90

$9.47
33.80%
415.1

50% Debt

3.33
2.00
$6.47
51.50%
17.5

3.41
2.04
$4.92
69.20%
10.5

70% Debt
3.49
2.09
$3.16
110.50%
7.5

Interest Coverage
Total Debt/ Lending
Stock Price at 9.43

1.87
$31.42
9.827

$32.17
10.04

117.92
$32.92
10.3

6.30%

6.70%

6.80%

7.00%

$30.00
$0

$31.58
$285.69
0 $39.99
$0.26
0

$32.31
$406.03
$56.84
$0.36

$33.16
$526.41
$73.69
$0.47

$30.00

Break Even PE for price 30

Dividend Yeild at 30
price at divident yeild 6.3
tax savings
aggregate ($million)
Per Beginging Shares

Earning Available to Security Holders

Chage
Cash flow to security holders
Change
Taxes, Change
Control
% share bought
JP Morgan Sateke 2.5%

Risk
DOL
DFL
EBIT Indifference
If EBIT reduces 10%
Impact on Net Income
Original PAT
Changed EBIT
Changed EPS
Changed DPS

50.54

84.22

$9.39

499.60
$9.39

504.81
5.21

521.65
16.85

538.81
16.85

Debt ratio= Debt / (Debt + Equity)

EPS
DPS (60% of EPS)
Book value per share (Net worth/ No.
of share)
Return on equity (EPS / Book value
per share)
Interest coverage [ EBIT / Interest ]
Stock price at P/E of 9.43 [9.43 x
EPS]
Break-even P/E for price of $30 [ 30 /
EPS]
Dividend yield at price of $30
Price at dividend yield of 6.33%
Present value of tax savings =
t (additional debt + reduction in
cash)
Aggregate ($million)
Per beginning share (155.5 million
share)

Actual (.9%)
$3.18
$1.90
$9.47

30%
$3.33
$2.00
$6.47

50%
$3.41
$2.04
$4.92

70%
$3.49
$2.10
$3.16

33.80%

51.50%

69.20%

110.50%

415.1
$30.00

17.5
$31.42

10.5
$32.17

7.5
$32.92

9.43

9.01

8.8

8.6

6.30%
$30.00
$0
$0

6.70%
$31.58
$285.69
$1.83

6.80%
$32.31
$406.03
$2.61

7.00%
$33.16
$526.41
$3.39

Bond Rating Analysis

S&P Medians (1979-81)
Debt Ratio
Interest Coverage

AAA

AA
17%

BBB

BB

24%

Warner -Lambert
Debt Ratio
Interest Coverage
Rating
American Home Products
Debt Ratio
Interest C
Debt Rating
S&P
WarnerL Interest Coverage

Actual

30%

50%

70%