KOHLER CO.

GROUP 5

Sachet Gupta 18P163

Siddhant Baweja 18P170
Varun Ashar 18P190
Kriti Jain 18P202
Sonali Goyal 18P230
 WACC Calculation Case: WACC using market beta

Beta asset 0.77

D/E of Kohler 0.23
Beta equity 0.95
Risk free rate 20 yr bonds 6%
American American Briggs & Cummins Detroit
Standard Woodmark Masco Stratton Engine Diesel Risk premium (1998) 5.63%
Cost of equity 11.32%
Cost of asset 10.32%
Stock Market Data as of 4/30/1998
E/V 0.81
Ticker ASD AMWD MAS BGG CUM DDC D/V 0.19
Cost of debt 6.02%
Shares Outstanding (in thousands) 71,929 7,811 1,69,634 24,514 42,036 24,701 WACC 9.82%
Stock Price ($) 48.69 30.25 58 45.25 54.38 23
Case: WACC considering family business
Market Value of Equity 3,502.0 236.3 9,838.8 1,109.3 2,285.7 568.1

Market Value of Equity, Beta asset 1.53

D/E of Kohler 0.23
Average of Latest 36 Mths. 2,762.9 82.0 5,937.3 1,210.0 2,053.6 502.5
Beta equity 1.89
Beta Over Latest 36 Months 0.82 0.76 1.28 0.66 1.09 1.3 Risk free rate 20 yr bonds 6%
Risk premium (1998) 5.63%
Standard Deviation of Stock Returns a 7.7% 14.7% 6.4% 5.7% 8.5% 10.4%
Cost of equity 16.66%
D/E 80.2% 15.0% 22.6% 12.8% 33.4% 25.3% Cost of asset 14.64%

Unlevered beta 0.45 0.66 1.04 0.58 0.82 1.04 0.81

E/V
Total Beta 1.33 2.53 1.10 0.98 1.47 1.79 D/V 0.19
Cost of debt 6.03%
WACC 14.15%
 WACC Calculation using market betas
1998a 1999 2000 2001 2002
Years 0.67 1.67 2.67 3.67 4.67
EBIT 1,16,368.00 1,38,908.00 1,84,495.00 2,00,854.00 2,14,480.00
NOPAT 66,329.76 79,177.56 1,05,162.15 1,14,486.78 1,22,253.60
Depreciation 80,009.76 92,053.56 1,18,038.15 1,27,362.78 1,35,129.60
Capex 87,691.00 97,205.00 96,971.00 96,811.00 1,06,647.00
Change in NWC 794.00 26,318.00 33,021.00 47,681.00
Change in NOA 9,802.00 3,651.00 7,329.00 11,651.00
FCFF 58,648.52 63,430.12 96,260.30 1,04,688.56 91,404.20
Terminal Value 12,11,973.33
Discounting Factor 0.94 0.86 0.78 0.71 0.65
PV 55,096.78 54,258.58 74,976.26 74,247.11 8,41,694.06
Total EV 11,00,272.79
Debt 1,83,815.00
Equity Value 9,16,457.79
Total Shares 7,587.89
Value per share 120.78
Minority Discount 0.23
Illiquidity discount 0.25
Discounted Value per share 69.68
 WACC Calculation considering family business
1998a 1999 2000 2001 2002
Years 0.67 1.67 2.67 3.67 4.67
EBIT 1,16,368.00 1,38,908.00 1,84,495.00 2,00,854.00 2,14,480.00
NOPAT 66,329.76 79,177.56 1,05,162.15 1,14,486.78 1,22,253.60
Depreciation 80,009.76 92,053.56 1,18,038.15 1,27,362.78 1,35,129.60
Capex 87,691.00 97,205.00 96,971.00 96,811.00 1,06,647.00
Change in NWC 794.00 26,318.00 33,021.00 47,681.00
Change in NOA 9,802.00 3,651.00 7,329.00 11,651.00
FCFF 58,648.52 63,430.12 96,260.30 1,04,688.56 91,404.20
Terminal Value 6,59,852.42
Discounting Factor 0.92 0.80 0.70 0.62 0.54
PV 53,696.94 50,877.61 67,642.10 64,447.76 4,05,168.45
Total EV 6,41,832.86
Debt 1,83,815.00
Equity Value 4,58,017.86
Total Shares 7587.89
Value per share 60.36
Minority Discount 23.08%
Illiquidity discount 25%
Discounted Value per share 34.82
 Valuation using multiples
American American Briggs & Cummins
Standard Woodmark Masco Stratton Engine Detroit Diesel
Total Debt 2,404.0 13.4 1,187.9 259.6 1,250.0 107.4
Sales 6,139.5 327.0 3,945.0 1,327.2 5,821.0 2,233.0
EBITDA 699.3 37.6 838.4 178.3 487 105.5
Cash Flow c 462.5 27.4 553.4 127.2 390.2 82.8
EBIAT 292.6 17.1 437.3 80.4 224.2 41

EV 5,906.0 249.7 11,026.7 1,368.9 3,535.7 675.5

EBITDA 699.3 37.6 838.4 178.3 487.0 105.5
EV/EBITDA 8.4 6.6 13.2 7.7 7.3 6.4

EBITDA 1,94,043
EV/EBITDA 8.3
EV 16,03,414.14
Debt 2,09,972.00
Equity Value 13,93,442.14
Total Shares 7587.89
Value per share 183.64
Minority Discount 23.08%
Illiquidity discount 25%
Discounted Value per share 105.95
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