1. Executive Value Analysts
Kevin Carolan
Joseph Celentano
Annette Givelekian
Edward Keever
Diane Masi

2. Intrinsic Value

3. Drivers of Value Estimate
ROIC
NOPLAT
Spread
ROR

4. ROIC

5. NOPLAT

6. Spread

7. ROR

8. Segment Contribution To Value
Education
25.3%
Financial Services
70.2%
Media
4.5%

9. Education

10. Financial Services

11. Media and Information Services

12. Consolidated Divisions

13. Continuing Value as a % of Total Value

14. MVA MVA = $7.837 billion MVA = Market Cap – Invested Capital
= $11.594b - $3.767b
MVA = $7.837 billion

15. Market To Book Ratio Market Cap/Invested Capital =11594/3767 = 3.1
For every $1.00 invested the market will
pay $3.10

16. Restructuring Hexagon
Current Market Value
Value as is
Value With Internal Improvements
Value with Internal Improvements and Disposals
Value with growth
Total Potential Value

17. Media and Information Services
Media Division as a separate segment
Broadcasting
McGraw Hill to form alliance with Disney
Bring added sponsorship and viewership to McGraw Hill
Merge the B-to-B segment with the Financial Segment

18. Financial Services Combine Information Systems with Financial Systems
Internet Benefits
Rebound in Advertising
Increase of 14% to $1.67billion
Standard and Poor’s competes with Moody’s
Untapped markets

19. Education Continue to leverage the Internet
Strategic alliances with schools and authors
Use of third party links and cross references

20. Debt Capital Increase to 20%(WACC)

21. Use of Newly Created Debt
Invest in segments at the same rate as percentage of value to company
Education 25%
Financial Services 70%
Media and Information 5%

22. Change in Intrinsic Value
Value Estimate & Sensitivity Analysis:  Value Estimate Value Estimate
Intrinsic Share Intrinsic Share
Value-EP Value-FCF
Present value of EP or Cash Flow Stage , ,407.0
Add: beginning capital (EP model only) ,847.0
 Intrinsic operating value , ,407.0
times: mid-year adjustment factor
Operating Value , ,054.2
Add: Non-operating assets
Intrinsic total value , ,434.8
Less: Total MV of debts and lease (1,861.8)  (1,861.8)  
Minority interest
Preferred shares
Employee stock options
Intrinsic common equity value , ,573.0
Divided by: # of common shares outstanding
Intrinsic share value
        

23. New Capital Structure As Is New Cap EPS 8.9 10.3 ROIC 24% 26%
NOPLAT 1.5B B
Cash 11B 15B

24. Continuing Value as a % of Total Value
EP FCF
Forecast Period % %
Continuing Value Period % %

25. Probability Scenarios
Scenario A: Steady growth in population of the U.S., college students and the Asian population enables global expansion resulting in a 5% yearly growth rate with an equivalent growth in operating profit.
Scenario B: MHP restructures its capital by increasing its debt ratio to 20%. Excess cash is invested in upgrading the media segment resulting in a growth in market share and advertising revenues. This is in great part due to business received from Disney, which is the parent company of its ABC affiliates. This, plus global expansion of its education and financial segments results in a 10% yearly growth rate.
Scenario C: Choice provider of educational materials and financial analyst tools worldwide. Restructures capital , increasing debt ratio to 30%. Through a set of acquisitions of media entities it becomes a major player in the industry. Consistent yearly growth of 15% leads to an acceleration of operating margins with no end in sight. MHP becomes the GE of the 21st century.

26. Weighting For Probability
Expected Value
Intrinsic Value Prob Expected Value
(Share $) (%) (Share $)
Scenario A
Scenario B
Scenario C
84.6

27. Executive
Value
Analysts