1. Calculate the value of common equity using the present value of dividends and cash flows to common shareholders.

2. Identify the reason(s) for any differences in the valuations in question 1.

Cost of Equity Capital Terminal Value Growth Rate Year Beg. BV Equity Net Income End. BV Equity 9.34% 3.00% +10 +5 192.0206.0216.6 31.8 +4 +7 227.7234.2 36.8 238.1 +6 +9 165.8 24.5 39.4 255.8 269.5 58.7 239.4 255.8 269.5 277.6 238.1 2 34.2 27.6 192.0206.0 29.6 216.6 227.7234.2 25.8 39.5 53.9 57.0 72.9 (31.2(41.1(41.9) (42.7) (43.5) (44.4) (45.2)(46.0 (47.3)(48 (22.1) 45.4 92.4 73.2 67.1 (2.0) 0.8 85.2 CFO CF Investing CF LT Debt Dividends Change in Cash 51.2 56.3 61.5 78.9 85.6 2.0 11.4 0.7 (0.5) (13.6 (19.0) (20.8 27.7 0.8 (32.9) (38.2) 74) (43.3) (50.6) 0.5 0.8 0.8 0.8 0.9 Note: Assume no purchases or sales of marketable securities in CF Investing. The amounts for Year +11 result from increasing each income statement and balance sheet amount by the terminal value growth rate of 3% and then deriving the amounts for the statement of cash flows