1. FINANICAL MODELING
PROJECT
Panera Bread Company
Li, Xin & Chen, Xin
BentleyUniversity
FI402A-001
November 24, 2014

2. 1
Introduction
In this assignment, our primarily goal was to build a financial model for Panera Bread Company
(NASDAQ: PNRA), which could fairly value the company for year 2013. Panera Bread was founded in
1998 originally and it has grown into a company that operates in the retail bakery-café segment, which is
the restaurant industry that belongs to the services sector. For the financial model, we mainly used the
Benninga’s worksheets. We analyzed Panera Bread’s financial statements (Balance Sheets, Income
Statements, and Cash Flow Statement) for the period of 2009-2013. Then, we created a pro forma for the
next five years (2014-2018) to calculate the free cash flows. From there, we determined the WACC of the
company for year 2013 and made the final valuation based on the WACC. According to our calculation,
Panera Bread had a WACC of 7.65% in 2013. Therefore the stock price should be $184.23 per share.
Incorporation of Multi-years financials
Before we could analysis the company, we had to incorporate the last five years data into
Benninga’s model from its most recent 10-K report. In order to better analysis the company, we added
line items in Benninga’s model since Panera Bread’s financial statements reported differently. Here is a
list how we broke down certain lines in both its financial statements specifically:
Balance sheets:
Receivables = trade accounts receivable, net + other accounts receivable
Other current assets=prepaid expense and other + deferred income taxes
Other assets = goodwill + deposits and other
Other liabilities = deferred rent + other long-term liabilities
Income statements:
Sales = bakery-café sales,net + franchise royalties and fees + fresh dough and other product sales
to franchise
Cost of goods sold= cost of food and paper products + labor + occupancy +other operating
expenses
We also added other line items that were necessary for the model, such as accumulated other
comprehensive (loss) income, fresh dough and other product cost of sales to franchisees, and pre-opening
expense. From there, we incorporated all the data into justified Benninga’s model according to its 2013
10-K report. Once we finished entering all the data, we checked the EBITDA, EBIT and EBT to find out
any errors we made. In Benninga’s model, they were operating income before depreciation for EBITDA
and pretax income for EBT. There wasn’t a line for EBIT. We knew we accomplished the incorporation
process once the EBITDA and EBT matched with its 10-k’s numbers.
Analysis ofhistorical financials
After finished the company’ financial statement formation, we began to figure out the parameters
that were needed for the 5 year Pro froma. According to Benninga’s model, the future anticipated ratios
were determined by their historical ratios. Hence for our first step was to find historical ratios. Most of
required model parameters were calculated as a percentage of sales from the same fiscal year. The others,
which were not calculated as a percentage of sales, were measured by their related line items. For
example, tax expense were measured by the tax/EBT ratio. From there, we took the average value of these

3. 2
five years’ ratios. For example: accounts payable/sales parameter = the sum of accounts payable/sales in
five year and divided by 5. Sales growth rates were calculated by each segment and the total revenue was
the sum of all segments together. In addition, there were some parameters we didn’t use because there
were no information for the related line items. For example, the company does not payout dividends
according to its dividend payout police indicated on the 10-K report. We also created few new parameters
in order to complete the forecast model. For accumulated other comprehensive (loss) income, we took a
ratio over the total asset since it was an item related to foreign transaction cost of the total asset and total
liabilities. There was one parameter that we needed to change completely, which was the interest
expense/debt. According to the company 10-K reports, Panera Bread did not have any long-term debt
between 2009 and 2013. However, it did have interest expense. Therefore, we decided to change the
parameter to interest expense/other liabilities and took the average of those ratios in the past of five years.
Another important information we found out was the company just issued a $100 million dollar debt on
June 11th
2014, which would be mature in 2019 according to its 2014 second quarter 10-Q report (Exhibit
5). In its 10-Q report, it indicates that the interest rate will between 1.00% and 1.50% plus the US 3
month LIBOR rate. Therefore, we decided to 1.25% plus the 3 month LIBOR rate, which was 0.23%
according to Yahoo Finance. From there, we made an interest payment table in Excel and added them to
interest expense.
The last step for this portion is to choose what is plug. In our case, we decided to use treasure
stock as our plug, which was also what Benninga used in his model. We have the following reasons to
make this decision: first of all, there was no reasonable calculation for treasury stock because the
company’s managers have the authority to control how many stocks to issue in the future. Secondly, there
was no current debt for the past year. Lastly, the minority interest were 0 for 2011, 2012 and 2013.
Therefore, common stock and treasury stocks were our ideal choice. However, common stocks’ value is
equal to par value plus paid in capital. There are two variables. Thus, we decided to choose treasury stock
as our plug, where the treasury stock equals all current liabilities plus debt plus deferred taxes plus
minority interest plus other liabilities plus common stock plus capital surplus plus retained earnings and
finally minus total assets.
Conference Calls
Although there are many exciting news for Panera Bread, the most recent conference call delivers
more negative signals than it expected to be. Panera Bread’s most recent conference call is on October 29,
2014, which is the third quarter of this year. The increasing investment, labor expense and depreciation
expense apparently get its audiences’ attention. They concern the potential risk will impact the
performance of stock price during the rest of quarter. Furthermore, the CFO was not even confident with
the number (3%-3.5% growth rate in the fourth quarter) will be correct. On the other hand, that so-called
good news is not such solid statement. The new opened stores-Panera 2.0-are likely won’t be profit in the
rest of year; instead, they are more likely to increase cost and risk for the growth. Other good news, for
instance, low tax rate is also not certain. We think the executives are knowledgeable regarding the daily
operation and company concerns.
Determination ofWACC
In order to determine the WACC of Panera Bread in 2013, we first computed the beta of the
company by using the historical data from the past five years. We acquired the past five year’s monthly
historical prices from yahoo finance. From there, we computed the slope of the regression line, which is

4. 3
the monthly returns of Panera Bread against the monthly returns of S&P 500 Index for the same period of
time. We got the beta of 0.71. (Exhibit 3)
In Benninga’s model, he calculated the WACC by using four different approaches, which are
Gordon per-share dividends model, Gordon equity payout and interest model, CAPM and tax-adjusted
CAPM. However, we didn’t use the Gordon per-share dividends model because Panera Bread does not
pay dividends. We didn’t use the Gordon equity payout and interest model either because the company
treasury stock increased by almost $340 billion dollar amount and again it does not pay dividends.
Therefore, the Gordon equity payout and interest model is not comparable for the calculation of Panera
Bread’s beta. As a result, we use the CAPM and the tax-adjusted CAPM model. The CAPM is equation is
E(r) =Rf+ (Rm-Rf). We choice the risk-free rate is 3.03% according to Bloomberg data (Exhibit 1) and
the expected market return is 9.78%. Therefore, we got the cost of equity is 7.79%. For the tax-adjusted
CAPM, the formula is E(r) =Rf (1-T) + (Rm-Rf (1-T)), where T is the tax rate, in our case which is
37.27%. We got 7.46% for cost of equity under this model.
For cost of debt. we took the interest expense from year 2013, which is $1,053 million, divided
by the average other liabilities from year 2012 and 2013 since the company does not have any long-term
debt in those two years. As a result, we got 0.96% for cost of debt.
From there, we got all the data we needed to calculate the WACC. The formula we used to
determine our WACC was WACC=E/ (E+D)*Ce + D/ (E+D)*Cd*(1-T). We got 7.72% for WACC under
CAPM model and 7.39% for WACC under tax-adjusted CAPM model. Therefore, the final WACC we
used for our valuation process was 7.56%, which was an average of these two. From here, we used
Bloomberg in the trading room to find the WACC of Panera Bread in year 2013 and we got 9.1%.
(Exhibit 2)
Panera Bread Company’s WACC 2013
Calculated WACC 7.56%
Bloomberg WACC 9.10%
Final Valuation
After we got the WACC, we did the final valuation process, which was discounted the following
5 years free cash flows by the WACC. For year 2018, we also calculated the terminal value by taking the
assumption that the long term growth rate was 5%. We got $184.23 for the stock price under our model
and the real stock price was $176.96 on December 31st
2013 according to Yahoo Finance. Therefore, our
rating is hold.
Conclusion
In this project, we first incorporated the data of Panera Bread Company from 2009 to 2013 into
Benninga’s model and made necessary adjustments. Then we analyzed the historical financial data to
build financial models and also tried to make our model as accurate as possible by acquiring all
information we though was important such as the most recent company’s conference calls. Next, we built

5. 4
the 5 year Pro froma for 2014-2018. After that we determined the WACC of the company, which allowed
us to finish the final valuation process in the end.

6. 5
Reference
Panera Bread Company. (n.d.). Retrieved from
http://finance.yahoo.com/q?s=pnra&type=2button&fr=uh3_finance_web_gs_ctrl2&uhb=uhb2
Panera Bread Company (2013). From 10-K 2013. Retrieved from Panera Bread Company Website
https://www.panerabread.com/en-us/company/financial-reports.html
Panera Bread Company (2013). From 10-Q 2014 Second Quarter. Retrieved from Panera Bread Company
Website https://www.panerabread.com/en-us/company/financial-reports.html
Bloomberg L.P. (2013) Panera Bread Company 2013’s WACC. Retrieved Nov. 23, 2014 from
Bloomberg database.
Bloomberg L.P. (2013) US Generic Govt 10Year Yield. Retrieved Nov. 23, 2014 from Bloomberg
database.

7. 6
Attachment
Exhibit 1
Exhibit 2

8. 7
Exhibit 3
Exhibit 4
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.416108
R Square 0.173146
Adjusted R
Square 0.15864
Standard Error 0.068734
Observations 59
ANOVA
df SS MS F
Significan
ce F
Regression 1 0.05639 0.05639
11.9359
7 0.001046
Residual 57
0.26928
9
0.00472
4
Total 58
0.32567
9
Coefficien
ts
Standar
d Error t Stat P-value
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept 0.012813
0.00937
3
1.36692
1
0.17701
7 -0.00596
0.03158
2
-
0.00596
0.03158
2
y = 0.706x + 0.0128
-22%
-17%
-12%
-7%
-2%
3%
8%
13%
18%
23%
-16% -11% -6% -1% 4% 9%
PPGreturn
SP500 return
Computing the Beta for PPG
using monthly price data for PPG and the SP500

9. 8
X Variable 1 0.705969
0.20434
2
3.45484
7
0.00104
6 0.296782
1.11515
7
0.29678
2
1.11515
7
Exhibit 5

10. 9
Financials
Panera Bread Company BALANCE SHEETS, 2009-2013 (Thousands $)
ASSETS 2013 2012 2011 2010 2009
Cash and Short-Term Investments 125,245 297,141 222,640 229,299 246,400
Receivables 84,602 86,262 54,709 38,340 28,493
Trade accounts receivable, net 32,965 43,843 30,700 20,378 17,317
Other accounts receivable 51,637 42,419 24,009 17,962 11,176
Inventories - Total 21,916 19,714 17,016 14,345 12,295
Other Current Assets 70,953 75,725 58,754 48,701 34,896
Prepaid expense and other 43,064 42,223 31,228 23,905 16,211
Deferred income taxes 27,889 33,502 27,526 24,796 18,685
Total Current Assets 302,716 478,842 353,119 330,685 322,084
Property, Plant, and Equipment,
Gross 775,932 662,693 571,921 512,857 470,946
Depreciation, Depletion, and
Amortization (Accumulated) 106,523 90,939 79,899 68,763 67,162
Property, Plant, and Equipment,
Net 669,409 571,754 492,022 444,094 403,784
Intangibles 79,768 88,073 67,269 48,402 19,195
Other Assets 128,969 129,494 114,912 101,400 92,102
Goodwill 123,013 121,903 108,071 94,442 87,481
Deposits and other 5,956 7,591 6,841 6,958 4,621
TOTAL ASSETS 1,180,862 1,268,163 1,027,322 924,581 837,165
LIABILITIES
Accounts Payable 17,533 9,371 15,884 7,346 6,417
Accrued Expense 285,792 268,169 222,450 204,170 135,842
Other Current Liabilities 0 0 0 0 0
Debt 0 0 0 0 0
Deferred Taxes 65,398 60,655 34,345 30,264 28,813
Minority Interest 0 0 0 0 0
Other Liabilities 112,247 108,109 99,567 87,193 69,057
Deferred rent 65,974 59,882 54,055 47,974 43,371
Other long-term liabilities 46,273 48,227 45,512 39,219 25,686
EQUITY
Common Stock 3 3 3 3 3
Capital Surplus 196,908 174,690 150,093 130,005 168,288
Accumulated other
comprehensive (loss) income -333 672 308 275 224

11. 10
Retained Earnings 1,049,884 853,715 680,267 544,315 432,449
Less: Treasury Stock - Total
Dollar Amount 546,570 207,161 175,595 78,990 3,928
Total stockholders’ equity 699,892 821,919 655,076 595,608 597,036
TOTAL LIABILITIES AND
EQUITY 1,180,862 1,268,223 1,027,322 924,581 837,165
COMMON SHARES
OUTSTANDING
(million) 28,629 29,217 29,601 30,614 30,667
Balance sheet--historical ratios
ASSETS 2013 2012 2011 2010 2009
Cash and Short-Term Investments
Receivables/Sales 3.55% 4.05% 3.00% 2.49% 2.11%
Inventories/Sales 0.92% 0.93% 0.93% 0.93% 0.91%
Other Current Assets/Sales 2.97% 3.56% 3.22% 3.16% 2.58%
Operating CA/Sales 12.69% 22.48% 19.38% 21.44% 23.80%
Property, Plant, Equipment,
Gross/Sales 32.53% 31.11% 31.39% 33.25% 34.79%
Annual depreciation/PPE 13.73% 13.72% 13.97% 13.39% 14.26%
Property, Plant, Equipment,
Net/Sales 28.07% 26.84% 27.00% 28.79% 29.83%
Other Assets/Sales 5.41% 6.08% 6.31% 6.57% 6.80%
Other Assets,growth rate since
2009 6.23% <--=AVERAGE(B59:F59)
LIABILITIES
Accounts Payable/Sales 0.74% 0.44% 0.87% 0.48% 0.47%
Accrued Expense/Sales 11.98% 12.59% 12.21% 13.24% 10.04%
Other Current Liabilities/Sales 0.00% 0.00% 0.00% 0.00% 0.00%
Operating CL/Sales 12.72% 13.03% 13.08% 13.71% 10.51%
Debt
Debt/equity 0.00% 0.00% 0.00% 0.00% 0.00%
Debt/assets 0.00% 0.00% 0.00% 0.00% 0.00%
Accumulated other
comprehensive (loss) income -0.03% 0.05% 0.03% 0.03% 0.03%
Other Liabilities/Sales 4.71% 5.08% 5.46% 5.65% 5.10%
Other Liabilities, growth rate
since 2009 12.91% <--=(B31/F31)^(1/4)-1

12. 11
Balance sheet--model
parameters
ASSETS
Cash and Short-Term Investments constant
Receivables/Sales 3.04% <--=AVERAGE(B50:F50)
Inventories/Sales 0.92% <--=AVERAGE(B51:F51)
Other Current Assets/Sales 3.10% <--=AVERAGE(B52:F52)
Operating CA/Sales 19.96% <--=AVERAGE(B53:F53)
Property, Plant, Equipment,
Gross =accrued depreciation + net plant, property, equipment
Accrued depreciation =previous year's accrued + this year's depreciation from income
Property, Plant, Equipment,
Net/Sales 28.07% <--=B57
Other Assets, annual growth rate 6.23% <--=B60
LIABILITIES
Accounts Payable/Sales 0.60%
Accrued Expense/Sales 12.01%
Other Current Liabilities/Sales 0 <-- constant at current level
Debt/Assets 0% <-- approximately current level
Deferred taxes grows at sales growth
Accumulated other
comprehensive (loss) income 0.02%
Minority Interest 0 <-- constant at current level
Other Liabilities, annual growth
rate 12.91% <--=B74
EQUITY
Common Stock 3
Capital Surplus 196,908
Retained Earnings
=previous year's retained + this year's retentions from income
statement
Treasury Stock - Total Dollar
Amount PLUG
Panera Bread Company INCOME STATEMENTS, 2009-2013 (Thousands $)
2013 2012 2011 2010 2009
Sales
2,385,00
2
2,130,05
7
1,822,03
2
1,542,48
9
1,353,49
4
Bakery-café sales,net 2,108,90 1,879,28 1,592,95 1,321,16 1,153,25

13. 12
8 0 1 2 5
Franchise royalties and fees 112,641 102,076 92,793 86,195 78,367
Fresh dough and other product sales to
franchisees 163,453 148,701 136,288 135,132 121,872
Cost of Goods Sold
1,695,43
4
1,498,84
8
1,285,93
9
1,071,98
5 959,586
Cost of food and paper products 625,622 552,580 470,398 374,816 337,599
Labor 625,457 559,446 484,014 419,140 370,595
Occupancy 148,816 130,793 115,290 100,970 95,996
Other operating expenses 295,539 256,029 216,237 177,059 155,396
Fresh dough and other product cost of sales to
franchisees 142,160 131,006 116,267 110,986 100,229
Selling, General, and Administrative Expense 123,335 117,932 113,083 101,494 83,169
Pre-opening expense 7,794 8,462 6,585 4,282 2,451
Operating Income Before Depreciation 416,279 373,809 300,158 253,742 208,059
Depreciation and Amortization 106,523 90,939 79,899 68,673 67,162
Interest Expense 1,053 1,082 822 675 700
Nonoperating Income (Expense) and Special
Items -4,017 -1,208 -466 4,232 273
Pretax Income 312,720 282,996 219,903 180,162 139,924
Income Taxes - Total 116,551 109,548 83,951 68,563 53,073
Minority Interest 0 0 0 -267 801
Income Before Extraordinary Items 196,169 173,448 135,952 111,866 86,050
Extraordinary Items and Discontinued
Operations 0 0 0 0 0
Net Income (Loss) 196,169 173,448 135,952 111,866 86,050
Cash Dividends 0 0 0 0 0
Retained 196,169 173,448 135,952 111,866 86,050
Dividends per share 0.00 0.00 0.00 0.00 0.00
Earnings Per Share (Primary) - Excluding
Extraordinary Items 6.85 5.94 4.59 3.65 2.81
Earnings Per Share (Primary) - Including
Extraordinary Items 6.85 5.94 4.59 3.65 2.81
Common Shares Used to Calculate Primary
EPS 28629 29217 29601 30614 30667
Earnings Per Share (Fully Diluted) -
Excluding Extraordinary Items 6.81 5.89 4.55 3.62 2.78
Earnings Per Share (Fully Diluted) - Including
Extraordinary Items 6.81 5.89 4.55 3.62 2.78

14. 13
Profit and loss historical ratios 2013 2012 2011 2010 2009
COGS/Sales 71.09% 70.37% 70.58% 69.50% 70.90%
Cost of food and paper products/Sales 26.23% 25.94% 25.82% 24.30% 24.94%
Labor 26.22% 26.26% 26.56% 27.17% 27.38%
Occupancy 6.24% 6.14% 6.33% 6.55% 7.09%
Other operating expenses 12.39% 12.02% 11.87% 11.48% 11.48%
Fresh dough and other product cost of sales to
franchisees 5.96% 6.15% 6.38% 7.20% 7.41%
SG&A/Sales 5.17% 5.54% 6.21% 6.58% 6.14%
Pre-opening expense 0.33% 0.40% 0.36% 0.28% 0.18%
Total costs/Sales (sum of above items) 82.55% 82.45% 83.53% 83.55% 84.63%
Depreciation/Gross fixed assets 13.73% 13.72% 13.97% 13.39% 14.26%
Interest expense/Average other long-term
liabilties 0.96% 1.04% 0.88% 0.86%
Incomes Taxes/Pretax Income 37.27% 38.71% 38.18% 38.06% 37.93%
Minority Interest/(Pretax - Taxes) 0.00% 0.00% 0.00% -0.24% 0.92%
Dividends/Net Income 0.00% 0.00% 0.00% 0.00% 0.00%
Profit and loss--model parameters
COGS/Sales 66.47%
=AVERAGE(B38:K3
8)
Cost of food and paper products/Sales 25.45%
Labor 26.72%
Occupancy 6.47%
Other operating expenses 11.85%
Fresh dough and other product cost of sales to
franchisees 6.62%
SG&A/Sales 5.93%
=AVERAGE(B44:F4
4)
Pre-opening expense 0.31%
Depreciation/Gross fixed assets 13.73% =B48
Interest rate 0.94%
=AVERAGE(B49:E4
9)
Tax rate 37.27% =B50
Minority Interest/(Pretax - Taxes) 0.00% =B51
Dividend growth 0.00% <-- See explanation in section 4.9
PNRA, FINANCIAL MODEL, 2014-2018
Profit and loss assumptions
Sales growth 15.21%
Bakery-café sales,net growth 16.29%
Franchise royalties and fees
growth 9.49%

15. 14
Fresh dough and other product
sales to franchisees growth 7.61%
COGS/Sales #REF!
Cost of food and paper
products/Sales 25.45%
Labor 26.72%
Occupancy 6.47%
Other operating expenses 11.85%
Fresh dough and other product
cost of sales to franchisees 6.62%
SG&A/Sales 5.93%
Pre-opening expense 0.31%
Depreciation/Gross fixed assets 13.73%
Interest rate 0.94%
Minority interest as % of PAT 0.00%
Growth rate of total dividends 0.00%
Tax rate 37.27%
Balance sheet assumptions
Assets
Cash and short-term investments constant
Receivables/Sales 3.04%
Inventories/Sales 0.92%
Other Current Assets/Sales 3.10%
Property, Plant, Equipment,
Net/Sales 28.07%
Investments and advances constant
Other Assets/Sales 6.23%
Liabilities
Accounts Payable/Sales 0.60%
Accrued Expense/Sales 12.01%
Other Current Liabilities/Sales constant
Debt/Assets 0.00%
Deferred Taxes
growth at sales
growth
Accumulated other
comprehensive (loss) income 0.02% over total asset
Minority Interest assumed constant
Other liabilities, annual growth 12.91%
Treasury stock plug
PROFIT AND LOSS 2013 2014 2015 2016 2017 2018
Sales
2,385,00
2
2,751,6
32
3,176,1
70
3,667,8
98
4,237,5
95
4,897,7
83
Bakery-café sales,net growth
2,108,90
8
2,452,3
97
2,851,8
31
3,316,3
23
3,856,4
70
4,484,5
93

16. 15
Franchise royalties and fees
growth 112,641
123,33
5
135,04
5
147,86
6
161,90
5
177,27
6
Fresh dough and other product
sales to franchisees growth 163,453
175,90
0
189,29
4
203,70
9
219,22
1
235,91
4
Cost of Goods Sold
1,695,43
4
1,939,4
88
2,238,7
24
2,585,3
19
2,986,8
70
3,452,2
04
Cost of food and paper
products/Sales 625,622
700,19
6
808,22
7
933,35
5
1,078,3
24
1,246,3
19
Labor 625,457
735,27
5
848,71
7
980,11
4
1,132,3
45
1,308,7
57
Occupancy 148,816
178,00
8
205,47
2
237,28
3
274,13
8
316,84
7
Other operating expenses 295,539
326,00
9
376,30
7
434,56
6
502,06
3
580,28
1
Fresh dough and other product
sales to franchisees growth 142,160
182,11
7
210,21
5
242,76
0
280,46
6
324,16
0
Selling, General, and
Administrative Expense 123,335
163,11
1
188,27
6
217,42
5
251,19
5
290,33
0
Pre-opening expense 7,794 8,498 9,809 11,328 13,087 15,126
Operating Income Before
Depreciation 416,279
458,41
8
529,14
5
611,06
6
705,97
7
815,96
3
Depreciation and Amortization 106,523
121,95
8
156,30
1
198,29
4
249,47
9
311,69
4
Interest Expense 1,053 1,118 1,262 1,425 1,609 1,817
Nonoperating Income (Expense)
and Special Items -4,017 -4,017 -4,017 -4,017 -4,017 -4,017
Pretax Income 312,720
339,35
9
375,59
9
415,36
4
458,90
6
506,46
9
Income Taxes - Total 116,551
126,47
9
139,98
6
154,80
7
171,03
4
188,76
1
Minority Interest 0 0 0 0 0 0
Net Income 196,169
212,88
0
235,61
3
260,55
8
287,87
1
317,70
8
Dividend 0 0 0 0 0 0
Accrued 196,169
212,88
0
235,61
3
260,55
8
287,87
1
317,70
8
ASSETS 2013 2014 2015 2016 2017 2018
Cash and Short-Term
Investments 125,245
125,24
5
125,24
5
125,24
5
125,24
5
125,24
5
Receivables 84,602 83,597 96,494
111,43
3
128,74
1
148,79
8
Inventories - Total 21,916 25,407 29,327 33,867 39,127 45,223
Other Current Assets 70,953 85,247 98,399
113,63
3
131,28
2
151,73
5
Total Current Assets 302,716 319,49 349,46 384,17 424,39 471,00

17. 16
5 5 9 6 2
Property, Plant, and Equipment,
Gross 775,932
1,000,7
93
1,276,2
51
1,612,5
61
2,021,9
39
2,518,9
31
Depreciation, Depletion, and
Amortization (Accumulated) 106,523
228,48
1
384,78
2
583,07
6
832,55
5
1,144,2
49
Property, Plant, and Equipment,
Net 669,409
772,31
3
891,47
0
1,029,4
85
1,189,3
85
1,374,6
82
Investments and Advances 0 0 0 0 0 0
Intangibles 79,768 79,768 79,768 79,768 79,768 79,768
Other Assets 128,969
137,01
0
145,55
1
154,62
6
164,26
6
174,50
7
TOTAL ASSETS
1,180,86
2
1,308,5
85
1,466,2
54
1,648,0
57
1,857,8
14
2,099,9
59
LIABILITIES 2013 2014 2015 2016 2017 2018
Accounts Payable 17,533 16,494 19,039 21,987 25,402 29,359
Accrued Expense 285,792
330,49
5
381,48
6
440,54
6
508,97
2
588,26
6
Other Current Liabilities 0 0 0 0 0 0
Debt 0
100,00
0 90,329 70,772 50,923 30,779
Deferred Taxes 65,398 75,348 86,812
100,02
0
115,23
8
132,77
2
Minority Interest 0 0 0 0 0 0
Other Liabilities 112,247
126,74
1
143,10
6
161,58
5
182,44
9
206,00
8
EQUITY
Common Stock 3 3 3 3 3 3
Capital Surplus 196,908
196,90
8
196,90
8
196,90
8
196,90
8
196,90
8
Accumulated other
comprehensive (loss) income -333 291 326 367 413 467
Retained Earnings
1,049,88
4
1,262,7
64
1,498,3
77
1,758,9
34
2,046,8
05
2,364,5
13
Less: Treasury Stock 546,570
800,45
9
950,13
2
1,103,0
65
1,269,3
00
1,449,1
16
Total stockholders equity 699,892
659,50
7
745,48
2
853,14
7
974,83
0
1,112,7
75
TOTAL LIABILITIES AND
EQUITY
1,180,86
2
1,308,5
85
1,466,2
54
1,648,0
57
1,857,8
14
2,099,9
59

18. 17
FREE CASH FLOW(FCF) 2014 2015 2016 2017 2018
Profit after tax
212,88
0
235,61
3
260,55
8
287,87
1
317,70
8
Add back depreciation
121,95
8
156,30
1
198,29
4
249,47
9
311,69
4
Change in net working capital
Increase in operating current assets -16,779 -29,970 -34,713 -40,218 -46,606
Add increase in operating current liabilities 43,664 53,536 62,008 71,841 83,252
Subtract capital expenditures
-
224,86
1
-
275,45
8
-
336,30
9
-
409,37
9
-
496,99
2
Subtract increase in other assets -8,041 -8,542 -9,074 -9,640 -10,241
Add back after-tax interest 701 792 894 1,009 1,140
FCF
129,52
2
132,27
1
141,65
7
150,96
4
159,95
5
2% 7% 7% 6%
5.42%
Valuing PNRA
WACC 7.56%
Long-term free cash flow growth
rate 5%
Year 2014 2015 2016 2017 2018
FCF
129,52
2
132,27
1
141,65
7
150,96
4
159,95
5
Terminal
6,569,0
69
Total
129,52
2
132,27
1
141,65
7
150,96
4
6,729,0
24
Discounted value
5,326,75
8
#NAM
E?
Add back initial cash 125,245
Firm value
5,452,00
3
Subtract total debt value, Dec.13 177,645
#NAM
E?
Implied equity value
5,274,35
8
Number of shares outstanding,
Dec.13
28,629.0
0
Implied value per share 184.23
Market price per share, Dec. 13 176.96
PPGover or under-valued? ok #NAM

19. 18
E?
DATA TABLE: SENSITIVITY OF PPG'S STOCK
VALUATION
TO WACC AND LONG-TERM GROWTH RATE
Long-term FCF growth ˜
184.23 1% 3% 4% 5% 6% 7%
6% 106.50 167.25 243.19 471.01 nmf nmf
7% 88.54 125.28 162.03 235.51 455.96 nmf
WACC → 8% 75.72 100.11 121.45 157.01 228.14
441.
53
9% 66.11 83.32 97.10 117.76 152.20
221.
07
10% 58.64 71.34 80.87 94.21 114.22
147.
58
11% 52.66 62.36 69.28 78.51 91.44
110.
83
12% 47.78 55.37 60.59 67.30 76.25
88.7
7
13% 43.71 49.78 53.83 58.89 65.39
74.0
7
14% 40.27 45.21 48.42 52.35 57.25
63.5
6
COMPUTING THE WEIGHTEDAVERAGE COST
OF CAPITAL (WACC) FOR PNRA
Shares outstanding (thousand) 28,629
Share price, end 2013 176.96
Equity value, E 5,066,188
Net debt, D 52,400
Cost of debt, rD 0.96%
=IF(B96>B97,B111,"nmf")

20. 19
PNRA's tax rate,TC 37.27%
Market risk free rate,rf 3.03%
Expected market return, E(rM) 9.78%
WACC based on classic CAPM and interest from
financial statements
PNRA beta 0.7060
Cost of equity, rE 7.79%
WACC 7.72%
WACC based on tax-adjusted CAPM and interest
from financial statements
PPGbeta 0.7060
Cost of equity, rE 7.46%
WACC 7.39%
Estimated WACC? 7.56%