1. Firm Valuation Lecture 7

2. Trading and Operating Comparables Aggregate Value Market Value Revenue EBITDA EBIT Net Income Total Debt Book Value/Share EPS LTM Revenue, Net Income, EBITDA growth rates P/E TSR

3. Profile of Home Depot & Lowe’s HD Lowe’s Market Cap$78.6B$46.6B Enterprise Value 84.7B 49.1B 1 yr TSR (9.5)% 4.3% 3 yr TSR 8.4% (6.3)% 2007 AV/EBITDA 7.0X 7.0X 2007E P/E Ratio 11.9 13.9 2008E P/E Ratio 10.7 12.2 Credit Rating Aa3/AA A1/A+

4. ROIC and P/E Multiples

5. Aggregate Value Analysis Purchase price per share $12 %Premium to Current price 20% Fully Diluted Shares Outstanding 100M Implied Equity Value $1.2B Plus Net Debt 0.4B Implied Aggregate Value $1.6B Current EBITDA $150M Implied AV/EBITDA 10.6X

6. Financial Outlook Analysis

7. Characteristics of Top Performing Firms Capital Efficiency Working Capital Efficiency Increasing Return on Invested Capital Rising Incremental Relative P/E values Bottomline Limited Capital Requirements and High NOPAT margins generate strong ROIC

8. Sale Process Alternatives One Party- Negotiated Sale Contact One Party Controlled Limited Auction Open Broad Auction Publicly Announce Pursuing Strategic Alternatives

9. Factors in the Decision Shareholder Marketing Senior Management Employees Contract Community

10. Factors in the Decision Marketing –Confidentiality –Number of potential Bidders –Timing –Information Flow

11. Factors in the Decision Senior Management –Willingness to stay on –Depth of the team –Contracts/Severance –Incentive-Stay Pay Agreements

12. Factors in the Decision Employees –Future Opportunity –Benefits –Job Security –Culture

13. Factors in the Decision Structure of the Deal –Representations and Warranties –Indemnifications –Closing Conditions