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Objective

Inputs nee

Output

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1. To compare how much a firm has returned to its stockholder historically (up

2. To provide an assessment of project quality (ROE compared to cost of equit

3. To provide forecasts of how much cash the firm will have available for stoc

For historical analysis:a. Net Income

b. Depreciation, amortization and other non-cash charges

c. Capital expenditures: Please include acquisitions as part of capital expendit

d. Non-cash working capital changes

In entering these numbers, please make sure that you get the signs right (check

e. Dividends: Only cash dividends should be shown here (ignore stock dividen

f. Stock Buybacks: Include the cash flow associated with stock buybacks.

For project assessment and stock price performance analysisa. Beta: You should really use an average beta over the historical period, but g

b. Book Value of Equity: To compute return on equity.

c. Return on the stock: This is the total return you would have made as an inve

d. Riskfree rate: The one-year government security rate at the start of each yea

e. Return on Stock Market: This is the total return on the stock market each ye

(You can get the last two from the worksheet that is part of this spreadsheet th

For forecasts

a. Expected growth rates in net income, dividends, depreciation, capital expen

b. Working capital as a percent of revenuesc. Debt as a percent of reinvestment, looking forward. As a default, you can us

Historical Analysis

1. FCFE and Cash Returned each year for the historical period

2. Returns on equity, the stock and your required return each year for the histo

3. Averages of both over the entire period

Forecasts

1. Forecasted FCFE for next 5 years

2. Forecasted dividends for next 5 years3. Cash available each year for stock buybacks for next 5 years.

Analysis of Dividend Policy

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to 10 years) with how much it could have returned.

) and stock price performance over the period.

buybacks in the future

res

the comment box on each of these inputs)

ds)

ahead and use your current beta if you do not have this.

tor: It includes price appreciation + dividend yield each year

(use the T.Bill rate)

r

t reports historical data on both)

itures and revenues

your historical average.

ical period

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Section 1: Inputs for estimating Dividends and FCFE

How many years of historical data do you have available?

Current debt to capital ratio =

Do you want to want to change this ratio to a target debt ratio?

If yes, enter the target debt ratio to use =

Enter the following data for the years for which you have data (starting with earliest year

Year Net Income Depreciation & Amortiz Capital Spending & operating inve

1 $6,136.00 $2,192.00 $2,796.00

2 $5,682.00 $1,987.00 $3,784.00

3 $4,807.00 $1,841.00 $3,559.00

4 $3,963.00 $1,713.00 $2,110.00

5 $3,307.00 $1,631.00 $1,753.00

6 $4,427.00 $1,582.00 $1,586.00

7 $4,687.00 $1,491.00 $1,566.00

8 $3,374.00 $1,437.00 $1,319.00

9 $2,533.00 $1,339.00 $1,823.00

10 $2,345.00 $1,210.00 $1,427.00

Enter the dollar dividends paid and equity repurchases for each year of historical data (sta

Year vidends (aggregat Equity Repurchases (in $)

1 $1,324.00 $4,087.00

2 $1,076.00 $3,015.00

3 $756.00 $4,993.00

4 $653.00 $2,669.00

5 $648.00 $648.00

6 $664.00 $4,453.00

7 $637.00 $6,923.00

8 $519.00 $6,898.00

9 $490.00 $2,420.00

10 $430.00 $335.00

Section 2: Assessing Investment Quality and Stock Performance

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The following section of the dividend policy analysis looks at the quality of your firm's inve

you have a measure of excess returns (ROIC- Cost of capital) or a Jensen's alpha compute

The last set of inputs to this analysis relate to project choice and performance:

Enter the beta for the equity of this firm: 0.90

Enter the following data relating to performance (starting with earliest year): (Make sure

Year BV: Equity Annual return on stock T.Bill rate

1 $380,078.00 -15.69% 0.13%

2 $330,056.00 24.73% 0.03%

3 $194,181.00 -7.29% 0.05%

4 $84,200.00

5 $63,437.00

6 $91,658.00

7 $79,717.00

8 $63,054.00

9 $44,602.00

10 $37,019.00

Use these inputs if you want to make projection of FCFE for the futureExpected growth in Revenues over next 5 years =

Expected growth in Net Income over next 5 years =

Expected growth in capital expenditures in next 5 years =

Expected growth in depreciation in next 5 years =

Enter non-cash working capital as a percent of revenues

Enter revenues from most recent year =

Enter net income from most recent year or normalized value =

Enter capital expenditures from most recent year or normalized value =

Enter depreciation in most recent year =

Enter dividends paid in the most recent year =

Expected growth in dividends 5%

Section 3: Inputs for forecasting future dividends and FCFE

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10 (number of years)

11.58%

No

40.00%

Use less years, if you do not have the data.

Chg in Non-Cash Net Debt Issued

($133.00) $1,881.00

$940.00 $4,246.00

$950.00 $2,743.00

$308.00 $1,190.00

($109.00) ($235.00)

$485.00 $1,005.00

$45.00 $4,990.00

($136.00) $2,891.00

$270.00 $1,076.00

$51.00 $276.00

ring with earliest year): (Equity repurchases are in the statement of cash flows)

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stments and the risk-adjusted, market-adjusted performance of your stock over the period. If

for your stock, you can use those measures instead of the ones computed here.

hat you update the riskfree rate and return on the market from the attached worksheet to refle

Return on market

14.82% Note: I have the numbers for the US in the Historical stock & t.bill worksheet.

2.07% Please match up the annual data for the years for your company.

15.83% If you are in foreign market and don't

have these numbers, leave them at the US levels.

5.00%

5.00%

5.00%

5.00%

6.00%

$42,278

$4,807

$3,559

$1,841

$756

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t the time period for your data)

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Dividend Policy

1 2 3 4 5 6 7

Net Income $6,136.00 $5,682.00 $4,807.00 $3,963.00 $3,307.00 $4,427.00 $4,687.00

- (Cap. Exp - Depr) $604.00 $1,797.00 $1,718.00 $397.00 $122.00 $4.00 $75.00

- Working Capital ($133.00) $940.00 $950.00 $308.00 ($109.00) $485.00 $45.00

Free CF to Equity (pre-debt) $5,665.00 $2,945.00 $2,139.00 $3,258.00 $3,294.00 $3,938.00 $4,567.00

+ Net Debt Issued $1,881.00 $4,246.00 $2,743.00 $1,190.00 ($235.00) $1,005.00

= Free CF to Equity (actual de $7,546.00 $7,191.00 $4,882.00 $4,448.00 $3,059.00 $4,943.00 $4,567.00

Free CF to Equity (target debt $5,719.54 $3,261.93 $2,447.94 $3,339.63 $3,295.51 $3,994.62 $4,580.90

Dividends $1,324.00 $1,076.00 $756.00 $653.00 $648.00 $664.00 $637.00

+ Equity Repurchases $4,087.00 $3,015.00 $4,993.00 $2,669.00 $648.00 $4,453.00 $6,923.00

= Cash to Stockholders $5,411.00 $4,091.00 $5,749.00 $3,322.00 $1,296.00 $5,117.00 $7,560.00

Dividend Ratios

Payout Ratio 21.58% 18.94% 15.73% 16.48% 19.59% 15.00% 13.59%Cash Paid as % of FCFE 71.71% 56.89% 117.76% 74.69% 42.37% 103.52% 165.54%

Performance Ratios

1. Accounting Measure

ROE 1.61% 1.72% 2.48% 4.71% 5.21% 4.83% 5.88%

Required rate of return 13.37% 1.86% 14.27%

ROE - Cost of Equity -11.75% -0.14% -11.79% 4.71% 5.21% 4.83% 5.88%

2. Stock Performance Measure

Analysis of Past Dividends

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Dividend Policy

Returns on stock -15.69% 24.73% -7.29%

Required rate of return 13.37% 1.86% 14.27%

Jensen's alpha -29.06% 22.87% -21.55%

Index 1 1 1 1 1 1 1

Aggregate Average

Net Income $41,261.00 $4,126.10Dividends $7,197.00 $719.70

Dividend Payout Ratio 17.44% 17.40%

Stock Buybacks $36,441.00 $3,644.10

Dividends + Buybacks $43,638.00 $4,363.80

Cash Payout Ratio 105.76%

Free CF to Equity (pre-debt) $33,290.00 $3,329.00

Free CF to Equity (actual debt) $44,120.00 $4,412.00

Free CF to Equity (target debt $34,212.99 $3,421.30

Cash payout as % of pre-debt 131.08%

Cash payout as % of actual FC 98.91%

Cash payout as % of target FC 127.55%

ROE 3.02%

Return on Stock 0.18%

Required Return 2.95%

ROE - Required return 0.07%

Actual - Required Return -2.77%

Page 27

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Dividend Policy

8 9 10 Aggregate

$3,374.00 $2,533.00 $2,345.00 $41,261.00

($118.00) $484.00 $217.00 $5,300.00

($136.00) $270.00 $51.00 $2,671.00

$3,628.00 $1,779.00 $2,077.00 $33,290.00

$10,830.00

$3,628.00 $1,779.00 $2,077.00 $44,120.00

$3,598.59 $1,866.31 $2,108.03 $34,212.99

$519.00 $490.00 $430.00 $7,197.00

$6,898.00 $2,420.00 $335.00 $36,441.00

$7,417.00 $2,910.00 $765.00 $43,638.00

15.38% 19.34% 18.34%

204.44% 163.58% 36.83%

5.35% 5.68% 6.33%

5.35% 5.68% 6.33%

Page 28

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Dividend Policy 29

1 1 1

Page 29

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FORECASTED FCFE AND DIVIDENDebt Ratio used in forecasting FCFE = 11.58%

Forecasted FCFE

1 2 3 4 5

Net Income $5,047 $5,300 $5,565 $5,843 $6,135- (Cap Ex - Deprec'n) (1 - DR) $1,595 $1,675 $1,759 $1,846 $1,939

- Change in Working Capital (1 - DR) $112 $118 $124 $130 $136

FCFE $3,340 $3,507 $3,683 $3,867 $4,060

Expected Dividends $794 $833 $875 $919 $965

Cash available for stock buybacks $2,546 $2,674 $2,807 $2,948 $3,095

Revenues $44,392 $46,611 $48,942 $51,389 $53,959

Non-cash WC $127 $133 $140 $147 $154

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DS

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Year &P 50 -month T.Bil0-year T. Bond

### ##### 3.08% 0.84%

### -8.30% 3.16% 4.20%

### ##### 4.55% 4.54%

### ##### 2.31% -2.56%

### -8.64% 1.07% 8.79%### ##### 0.96% 1.86%

### -1.19% 0.32% 7.96%

### ##### 0.18% 4.47%

### ##### 0.17% 5.02%

### ##### 0.30% 1.38%

### ##### 0.08% 4.21%

### -1.10% 0.04% 4.41%

### ##### 0.03% 5.40%

### ##### 0.08% -2.02%

### ##### 0.34% 2.29%### ##### 0.38% 2.49%

### ##### 0.38% 2.58%

### ##### 0.38% 3.80%

### -8.43% 0.38% 3.13%

### 5.20% 0.57% 0.92%

### 5.70% 1.02% 1.95%

### ##### 1.10% 4.66%

### ##### 1.17% 0.43%

### ##### 1.48% -0.30%

### ##### 1.67% 2.27%### -1.21% 1.89% 4.14%

### ##### 0.96% 3.29%

### ##### 1.66% -1.34%

### 7.44% 2.56% -2.26%

### ##### 3.23% 6.80%

### ##### 1.78% -2.10%

### ##### 3.26% -2.65%

### 0.34% 3.05% 11.64%

### ##### 2.27% 2.06%

### -8.81% 2.78% 5.69%### ##### 3.11% 1.68%

### ##### 3.51% 3.73%

### ##### 3.90% 0.72%

### -9.97% 4.84% 2.91%

### ##### 4.33% -1.58%

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### ##### 5.26% 3.27%

### -8.24% 6.56% -5.01%

### 3.56% 6.69% 16.75%

### ##### 4.54% 9.79%

### ##### 3.95% 2.82%

### ##### 6.73% 3.66%### ##### 7.78% 1.99%

### ##### 5.99% 3.61%

### ##### 4.97% 15.98%

### -6.98% 5.13% 1.29%

### 6.51% 6.93% -0.78%

### ##### 9.94% 0.67%

### ##### 11.22% -2.99%

### -4.70% 14.30% 8.20%

### ##### 11.01% 32.81%

### ##### 8.45% 3.20%### 6.15% 9.61% 13.73%

### ##### 7.49% 25.71%

### ##### 6.04% 24.28%

### 5.81% 5.72% -4.96%

### ##### 6.45% 8.22%

### ##### 8.11% 17.69%

### -3.06% 7.55% 6.24%

### ##### 5.61% 15.00%

### 7.49% 3.41% 9.36%

### 9.97% 2.98% 14.21%### 1.33% 3.99% -8.04%

### ##### 5.52% 23.48%

### ##### 5.02% 1.43%

### ##### 5.05% 9.94%

### ##### 4.73% 14.92%

### ##### 4.51% -8.25%

### -9.03% 5.76% 16.66%

### ##### 3.67% 5.57%

### ##### 1.66% 15.12%

### ##### 1.03% 0.38%### ##### 1.23% 4.49%

### 4.83% 3.01% 2.87%

### ##### 4.68% 1.96%

### 5.48% 4.64% 10.21%

### ##### 1.59% 20.10%

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### ##### 0.14% -11.12%

### ##### 0.13% 8.46%

### 2.07% 0.03% 16.04%

### ##### 0.05% 2.97%

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2012 2011 2010

Receivables -$108.00 -$518.00 -$686.00Inventories $18.00 -$199.00 -$127.00Other assets -$151.00 -$189.00 $42.00Accounts payable -$608.00 -$367.00 $649.00Income taxes -$242.00 $134.00 -$144.00

Chg in WC (Cash flow eff -$1,091.00 -$1,139.00 -$266.00

Commercial Paper $467.00 $393.00 $1,190.00Borrowings $3,779.00 $2,350.00 $0.00Reductions of borrowings -$3,822.00 -$1,096.00 -$1,371.00

Net Debt (Cash flow effec $424.00 $1,647.00 -$181.00

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Stock price Dividends Returns2009 32.752010 27.21 0.4 -15.69%

2011 33.34 0.6 24.73%2012 30.16 0.75 -7.29%

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YesNo