0. EXHIBIT 5.1 FRAMEWORKS FOR DCF-BASED VALUATION
LAN-ZWB ZWB
LAN-ZWB ZWB
EXHIBIT 5.1 FRAMEWORKS FOR DCF-BASED VALUATION
Model
Measure
Discount factor
Assessment
Enterprise discounted cash flow
Free cash flow
Weighted average
cost of capital
Works best for projects, business units, and companies that manage their capital structure to a target level
Economic profit
Weighted average
cost of capital
Explicitly highlights when a company creates value
Adjusted present value
Free cash flow
Unlevered cost of equity
Highlights changing capital structure more easily than WACC-based models.
Capital cash flow
Unlevered cost of equity
Compresses free cash flow and the interest tax shield in one number, making it difficult to compare performance among companies and over time
Equity cash flow
Cash flow to equity
Levered cost of equity
Difficult to implement correctly because capital structure is embedded within cash flow. Best used when valuing financial institutions

1. EXHIBIT 5.2 ENTERPRISE VALUATION OF A SINGLE-BUSINESS COMPANY
LAN-ZWB ZWB
LAN-ZWB ZWB
EXHIBIT 5.2 ENTERPRISE VALUATION OF A SINGLE-BUSINESS COMPANY
$ Million
Free cash flow from operations
Discount free cash flow by the weighted average cost of capital
Economic assets generate operating cash flow =
427.5
427.5
Enter-prise value
After-tax cash flow to debt holders
Debt value
200.0 +
Financial claims on the company’s operating cash flow
Cash flow equity holders
Equity value
227.5
Year 1 2 3 4 5
* Debt value equals discounted after-tax cash flow to debt holders plus present value of interest tax shield

2. EXHIBIT 5.3 ENTERPRISE VALUATION OF A MULTIBUSINESS COMPANY
LAN-ZWB ZWB
LAN-ZWB ZWB
EXHIBIT 5.3 ENTERPRISE VALUATION OF A MULTIBUSINESS COMPANY
$ Million
Unit A
Unit B
Unit C
Corporate center
Excess cash
Enterprise cash
Value of debt
Equity value
Value of operating units

3. EXHIBIT 5.4 HOME DEPOT: ENTERPRISE DCF VALUATION
LAN-ZWB ZWB
LAN-ZWB ZWB
EXHIBIT 5.4 HOME DEPOT: ENTERPRISE DCF VALUATION
Free cash flow (FCF)
$ Million
Discount factor
@ 9.3%
Present value of FCF
$ Million
Year
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Continuing value
1,930
2,219
2,539
2,893
3,283
3,711
4,180
4,691
5,246
5,849
133,360
0.915
0.837
0.766
0.700
0.641
0.586
0.536
0.491
0.449
0.411
1,766
1,857
1,944
2,026
2,104
2,175
2,241
2,301
2,355
2,402
54,757
Present value of cash flow
75,928
Mid-year adjustment factor
1,046
Value of operations
79,384
Value of excess cash
Value of other nonoperating assets
1,609 84
Enterprise value
81,077
Value of debt
Value of capitalized operating leases
(1,365)
(6,554)
Equity value
73,158
Number of shares (at fiscal year-end 2003, million)
2,257
Estimated share value (Dollars)
32.41

4. EXHIBIT 5.5 HOME DEPOT AND LOWE’S: HISTORICAL ROIC ANALYSIS
LAN-ZWB ZWB
LAN-ZWB ZWB
EXHIBIT 5.5 HOME DEPOT AND LOWE’S: HISTORICAL ROIC ANALYSIS
$ Million
Home Depot
Lowe’s
2001
2002
2003
2001
2002
2003
Net sales
Cost of merchandise sold
Selling, general and administrative
Depreciation
Operating lease interest
53,553
(37,406)
(10,451)
(756)
288
58,247
(40,139)
(11,375)
(895)
260
64,816
(44,236)
(12,658)
(1,075)
276
22,111
(15,743)
(4,053)
(517)
106
26,491
(18,465)
(4,859)
(626)
106
30,838
(21,231)
(5,671)
(758)
114
Adjusted EBITA
5,228
6,098
7,123
1,904
2,647
3,292
Adjusted taxes
(2,020)
(2,117)
(2,040)
(654)
(825)
(1,069)
NOPLAT
3,208
3,981
5,083
1,250
1,822
2,223
Invested capital
Operating working capital
Net property and equipment
Capitalized operating leases
Net other assets
2,552
15,375
5,459
(216)
2,746
17,168
5,890
(247)
2,674
20,063
6,554
(524)
1,634
8,653
2,189
134
1,451
10,352
2,373
145
1,363
11,945
2,762
211
Invested capital (excluding goodwill)
23,170
25,557
28,767
12,611
14,321
16,281
Acquired intangibles and goodwill
Cumulative amortization and
unreported goodwill
419 46
575 54
833 55
730
730
730
Invested capital (including goodwill)
23,635
26,185
29,655
13,341
15,051
17,012
ROIC excluding goodwill (average)
ROIC including goodwill (average)
14.5%
14.3%
16.3%
16.0%
18.7%
18.2%
10.9%
10.3%
13.5%
12.8%
14.5%
13.9%

5. EXHIBIT 5.8 HOME DEPOT: FREE CASH FLOW SUMMARY
LAN-ZWB ZWB
LAN-ZWB ZWB
EXHIBIT 5.8 HOME DEPOT: FREE CASH FLOW SUMMARY
$ Million
Home depot
Lowe’s
2001
2002
2003
2001
2002
2003
NOPLAT
Depreciation
Gross cash flow
Investment in operating working capital
Net capital expenditures
Investment in capitalized operating leases
Investments in intangibles and goodwill
Decrease (increase) in other operating assets
Increase (decrease) in accumulated other
comprehensive income
Gross investment
Free cash flow
3,208
756
3,964
834
(3,063)
(775)
(113)
105
(153)
(3,165)
799
3,981
895
4,876
(194)
(2,688)
(430)
(164) 31
138
(3,307)
1,569
5,083
1,075
6,157 72
(3,970)
(664)
(259)
277
172
(4,372)
1,785
5,185
1,193
6,378
(294)
(3,399)
(721)
(92) 58
(4,448)
1,930
5,741
1,321
7,062
(318)
(3,708)
(780)
(99) 62
(4,843)
2,219
6,342
1,459
7,801
(344)
(4,036)
(842)
(107) 67
(5,261)
2,539

6. EXHIBIT 5.10 HOME DEPOT: WEIGHTED AVERAGE COST OF CAPITAL
LAN-ZWB ZWB
LAN-ZWB ZWB
EXHIBIT 5.10 HOME DEPOT: WEIGHTED AVERAGE COST OF CAPITAL
Percent
Proportion of total capital
After-tax opportunity cost
Contribution to weighted average
Source of capital
Cost of capital
Marginal tax rate
Debt
Equity
8.3
91.7
100.0
4.7
9.9
38.2
2.9
9.9
0.2
9.1
9.3
WACC

7. EXHIBIT 5.11 HOME DEPOT: ECONOMIC PROFIT SUMMARY
LAN-ZWB ZWB
LAN-ZWB ZWB
EXHIBIT 5.11 HOME DEPOT: ECONOMIC PROFIT SUMMARY
$ Million, percent
Historical
Forecast
Method 1
2001
2002
2003
2004
2005
2006
Return on invested capital
15.0%
16.8%
19.4%
17.5%
17.4%
17.4%
Weighted average cost of capital
10.1%
9.0%
9.3%
9.3%
9.3%
9.3%
Economic spread
4.9%
7.9%
10.1%
8.2%
8.1%
8.1%
Invested capital
21,379
23,635
26,185
29,655
32,910
36,432
Economic profit
1,048
1,857
2,645
2,424
2,677
2,950
Method 2
Invested capital
21,379
23,635
26,185
29,655
32,910
36,432
Weighted average cost of capital
10.1%
9.0%
9.3%
9.3%
9.3%
9.3%
Capital charge
2,159
2,124
2,438
2,761
3,064
3,392
NOPLAT
3,208
3,981
5,083
5,185
5,741
6,342
Capital charge
2,159
2,124
2,438
2,761
3,064
3,392
Economic profit
1,048
1,857
2,645
2,424
2,677
2,950

8. EXHIBIT 5.12 HOME DEPOT: ECONOMIC PROFIT VALUATION
LAN-ZWB ZWB
LAN-ZWB ZWB
EXHIBIT 5.12 HOME DEPOT: ECONOMIC PROFIT VALUATION
Invested
Capital*
$ Million
Economic profit
$ Million
Discount
factor
@ 9.3%
Present value of economic profit
$ Million
ROIC
Percent
WACC
Percent
Year
2004
29,655
17.5
9.3
2,424
0.915
2,217
2005
32,910
17.4
9.3
2,677
0.837
2,241
2006
36,432
17.4
9.3
2,950
0.766
2,259
2007
40,235
17.4
9.3
3,242
0.700
2,271
2008
44,329
17.3
9.3
3,556
0.641
2,278
2009
48,729
17.3
9.3
3,890
0.586
2,281
2010
53,445
17.3
9.3
4,247
0.536
2,278
2011
58,488
17.2
9.3
4,627
0.491
2,270
2012
63,870
17.2
9.3
5,031
0.449
2,258
2013
69,600
17.2
9.3
5,458
0.411
2,241
Continuing value
57,671
0.411
23,679
Present value of economic profit
46,273
Invested capital*2004
29,655
Invested capital plus present value of economic profit
75,928
Mid-year adjustment factor
1.046
Value of operations
79,384
Value of excess cash
1,609
Value of other nonoperating assets 84
Enterprise value
81,077
Value of debt
(1,365)
Value of capitalized operating leases
(6,554)
Equity value
73,158
* Invested capital is measured at the beginning of the year

9. EXHIBIT 5.13 HOME DEPOT: VALUATION USING ADJUSTED PRESENT VALUE
LAN-ZWB ZWB
LAN-ZWB ZWB
Free cash flow $ Million
Interest
tax shield
(ITS)
Discount
factor
@ 9.5%
Present
value of FCF
$ Million
Present
value of ITS
$ Million
Year
2004
1,930
113
0.914
1,763
103
2005
2,219
120
0.835
1,852
100
2006
2,539
128
0.763
1,936 98
2007
2,893
136
0.697
2,016 95
2008
3,283
145
0.636
2,090 92
2009
3,711
153
0.581
2,158 89
2010
4,180
162
0.531
2,220 86
2011
4,691
171
0.485
2,276 83
2012
5,246
180
0.443
2,326 80
2013
5,849
189
0.405
2,369 77
Continuing value
129,734
3,626
0.405
52,550
1,469
Present value
73,557
2,372
Present value of FCF using unlevered cost of equity
73,557
Present value of interest tax shields (ITS)
2,372
Present value of FCF and ITS
75,928
Mid-year adjustment factor
1.046
Value of operations
79,384
Value of excess cash
1,609
Value of other nonoperating assets 84
Enterprise value
81,077
Value of debt
(1,365)
Value of capitalized operating leases
(6,554)
Equity value
73,158

10. EXHIBIT 5.14 HOME DEPOT: FORECAST OF INTEREST TAX SHIELDS
LAN-ZWB ZWB
LAN-ZWB ZWB
EXHIBIT 5.14 HOME DEPOT: FORECAST OF INTEREST TAX SHIELDS
Prior year
net debt $ Million
Expected
interest rate
Percent
Interest
payment
$ Million
Marginal
tax rate
Percent
Interest
tax shield
$ Million
Year
2004
6,310
4.7
295
38.2
113
2005
6,737
4.7
315
38.2
120
2006
7,179
4.7
336
38.2
128
2007
7,637
4.7
357
38.2
136
2008
8,107
4.7
379
38.2
145
2009
8,589
4.7
402
38.2
153
2010
9,081
4.7
425
38.2
162
2011
9,579
4.7
448
38.2
171
2012
10,081
4.7
472
38.2
180
2013
10,583
4.7
495
38.2
189
Continuing value
11,082
4.7
518
38.2
198

11. EXHIBIT 5.15 HOME DEPOT: EQUITY CASH FLOW SUMMARY
LAN-ZWB ZWB
LAN-ZWB ZWB
EXHIBIT 5.15 HOME DEPOT: EQUITY CASH FLOW SUMMARY
$ Million
Historical
Forecast
2001
2002
2003
2004
2005
2006
Net income
3,044
3,664
4,304
4,796
5,318
5,882
Depreciation
756
895
1,075
1,193
1,321
1,459
Amortization 8 8 1
Increase (decrease) in deferred taxes
(6)
173
605
214
237
262
Gross cash flow
3,802
4,740
5,985
6,203
6,876
7,603
Investment in operating working capital
834
(194) 72
(294)
(318)
(344)
Investment in net long-term assets
(3,224)
(2,683)
(3,780)
(3,433)
(3,745)
(4,076)
Decrease (increase) in excess cash
(1,509)
383
(473)
(177)
(191)
(207)
Investment in other nonoperating assets 9
(24) 23
(9)
(10)
(11)
Increase (decrease) in short-term debt
207
(211)
509
(44)
(54)
(66)
Increase (decrease) in long-term debt
(295) 71
(465)
(73)
(91)
(112)
Cash flow to equity
(176)
2,082
1,871
2,173
2,466
2,788
Dividends
396
492
595
663
735
813
Share repurchases (issued)
(572)
1,590
1,276
1,510
1,731
1,975
Cash flow to equity
(176)
2,082
1,871
2,173
2,466
2,788

12. EXHIBIT 5.16 HOME DEPOT: CASH-FLOW-TO-EQUITY VALUATION
LAN-ZWB ZWB
LAN-ZWB ZWB
EXHIBIT 5.16 HOME DEPOT: CASH-FLOW-TO-EQUITY VALUATION
Cash flow
to equity
$ Million
Discount
factor
@ 9.9%
Present value of CFE
$ Million
Year
2004
2,173
0.910
1,978
2005
2,466
0.828
2,042
2006
2,788
0.754
2,101
2007
3,143
0.686
2,155
2008
3,530
0.624
2,203
2009
3,954
0.568
2,245
2010
4,416
0.517
2,282
2011
4,917
0.470
2,312
2012
5,459
0.428
2,336
2013
6,044
0.389
2,353
Continuing value
122,492
0.389
47,695
Present value of cash flow
to equity
69,702
Midyear adjustment amount
3,456
Equity value
73,158