1). Using your two computed k values, compute the value (price) of your stock using the approach (see above discussion) shown in class by calculating the expected price of your stock 5 years from now and then discounting it back to the present. Calculate the present price using two different K values one that uses Value Lines beta value for your company and the other, which uses Yahoo Finances beta.

Approach:

1. Compute the expected dividend in 5 years by compounding todays dividend (D0) by the 5 year growth rate in dividends estimated by Value Line: D5 = D0(1+g5) 5

2. Compute the projected price P5, in five years by dividing D5 by the Value Line average dividend yield. Note that the dividend yield = k g by the Gordon Model: P5 = D5 /(VL average annual dividend yield)

3. Compute P0 by discounting P5 back for 5 years at the required return determined by the CAPM:

K = rf + B(rm-rf)

P0 = P5/(1+K)

K (Using Value lines beta) = 7.97%

K (Using yahoo finances beta) = 6.95%

2). Compare your valuation results with the current price of the stock (for this purpose, use the closing price of your stock as of Monday, November 1, 2021

3). Discuss your results and the implications of any assumptions that you employed in the valuation of your stock.

DVD STARBUCKS CORP. NDO-SBUX RECENT 117.94 30.5(9) RELAIME 1.60 1.7% LINE Tring 1938 128 TOT 1265 Target Price Range 2024 2025 2026 o ST 50 ao 526 361 1. SAFETY 1 215 LO LEGENDS 18 120 100 -80 8888 888 8 8 prt sc + prema -50 40 30 20 _ Return . TOT. RETURN 7/21 Thes VL ARTS STOCK NOEK ty 61.6 3 y. 144 48.6 syr 1294 955 80 7.08 8.87 10.97 1.85 3.53 4.11 1.56 2.61 1.91 1.17 4.10 Earnings per shop 281 206 1.00 36.45 6.75 5.25 2.60 2.65 1125.0 25.0 1.40 enter 42 52 120 R9 1.44 d5 DIES 277 232 Value Line 41000 30.5% 24.0% 5905 50% ( PE TIMELINESS 3 3 TECHNICAL 301 HETA 11.00 M 30 18-Month Target Price Range Low-High Midpoint" to Mid S$162 3135 (15%) om 2024-26 PROJECTIONS packspace Price An't Total Quin High 145 145 (+25 Low 120 7 WIN () 33 Institutionel Decisions 2009 to By 1 tel 990 1185 1101 Percent 8 21 AB783814 81010011395 suara 912 Tiraded 20 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 VALUE UNE PUS, LLCI 24-26 2235 20.04 2685 27.75 Sales per sh 18.88 5.15 6.37 705 58 12.00 14.5 15.64 9.89 7.85 6.58 7.21 455 2.40 54 5.45 "Cash Flow"per sh rat 64 .77 7a 1.01 .75 221 1.29 1.14 31 37 3.25 242 44 2.83 30 40 1.13 54 1.36 90 1.58 1.80 2.00 Div ds Decl'd per sh 1.64 -- 64 26 80 12 34 04.30 Book Value per sh 1.36 1.47 1.55 1.69 2.05 2.48 298 341 4.03 3.52 915632 TANG 1719 120 121 122 123 1561 282 286805131900 1826 1175.0 1766. Common Shs Outst go NMF Boldre are Avg Ann' PE Ratio 46,6 36.3 30 26.4 275 251 229 16011871223 26.5 27.9 304 10 Relative P/E Ratio NME 1.42 2.30 1.25 1.33 1.60 1.39 2.46 1.52 1.59 1.49 1.75 2.0% 1.47 1.07 1.19 1.43 ette 2.09 Avg Ann'l Div'd Yield .. 2.2% 1.9% 1.0% 1.5% 1.4% 1.4% 1.4% % 1.3% 14% 1.8% Tsi 29200 32300 Sales (mill) CAPITAL STRUCTURE as of 6/27/21 2650923518 1170113300 16448 14832 19160 21318 2238724720 Total Debt $14618.1 mil. Due in 5 Yrs 57000.0 28.9% 22.2% 29.5% 31.0% Gross Margin 23.9% 23.6% 25.3% 27.3% 28.7% 30.6% 29.9% 28.8% mit 22.4% 15.2" 22.5% 22.5% 200% Operating Margin 24.0% 17.5% 17.6% 19.0% 21,3% 22.4% 24.5% 24.2% 23.1% E 20000 hift LT Debt $13619.2 mil. LT Interest $675,0 mil. 9031 15834 16837 17200 17800 Number of Stores e 10194 1071312235 12711 9405 13275 15341 (more than 100% of Cap) 1382.7 3820 4780 Net Profit ($mil) 1173.6 1384.9 1721.4 2068,1 2393.9 2835.0 3011.0 3370.0 3492.4 25.0% Leases, Uncapitalized Annual rentals $1340.6 22.0% 22.0% Income Tax Rate 32.0% 32.85 32.6% % 32.6% 34.6% 34.0% 33.0% 33.3% 24.8% 19.4% 20.6% 14.4% % mW 100% 10.4% 11.6% 12.6% 12,5% 13.3% 13.4% % 13.4% 13.8% 13.2% 5,9% 13.1% 14.8% Net Profit Margin No Defined Benefit Pension Plan 2000 1719.1 250 500 Working Cap'l (Smil) 699.2 213.6 10627 6810.0 0514.8 458.6 1719.1 1989.8 28142 1130.0 13500 13500 Long-Term Debt (Smlll) 15000 - 549.5 32022 39326 9090.2 11167 14660 549.6 1299.4 2048.3 2347.5 3202.2 3932.6 9090.2 Pld Stock None . 3000 4387 3 5114.5 6196.5 5273.7 5819.8 5884,0 5450.1 1169.5 062322 07805.1 06800 15000 Shr. Equity (Smil) 35.0% % 62.0% 60.0% Return on Total Capi 24.18 24.7% 23.2% 26.7% 29.7% 31.6% 32.8% 33.7% 73,1% 23.1% Common Stock 1.179.1 mill shs. NMF NMF NMF 55.2% NME 48.2% 55.2% NMF NMF Return on Shr. Equity as of 7/21/21 26.8% 27.1% 27.8% 39.2% 41.1% 48.2% % NME NMF NMF MARKET CAP: $139 billion (Large Cap) NMF NMF NMF Retained to Com Eq 17.9% 17.0% 17.6% 24.4% 25.2% 29.2% 28.6% 33% NMF 38% 39% CURRENT POSITION 2019 2020 6/27/21 42% 37% 37% 49% 52% 50% 55% 49% All Divds to Net Prof (SMILL) Cash Assets 2757.1 4632.1 4906.7 BUSINESS: Starbucks Corp. is the leading retailer, roaster, and joint ventures with Pepsi-Cola and Dreyer's to develop bottled col- Receivables 883.4 9112 Inventory (FIFO) 1529.2 1551.4 15482 brand of specially coffee in the world. Sells whole bean coffees tee drinks and ice creams, respectively. Deal with Kraft to distribute Other 488.2739.5 565.6 565,6 through its specialty sales group, mail-order business, super- coffee in grocery stores terminated in 2/11. Has about 346,000 em- Current Assets 5653.97806,4 7931.7 markets, and online. Has 9,860 company-owned stores in the ployees. Oft/Dir own less than 1% of common stock (1/21 proxy). . .: , , Accts Payable . 11807 9978 11270 Americas and 7,013 elsewhere. Also has 16,422 licensed stores CEO: Kevin Johnson, Inc.: WA. Addr: 2401 Utah Ave. So., Seattle, 4979.0 6348.9 6672.8 worldwide. Retail sales: 91% of 20 total, CPG and other, 9%. Has WA 98134. Tel: 206-447-1575, Internet: www.starbucks.com. Other . , . . Current Liab. 6168.7 7346.8 7799.8 Results at coffee powerhouse Star- We're very upbeat about the growth ANNUAL RATES Past Past Est'd *18-20 bucks are bouncing back sharply. The prospects here. Softening same-store of change (per sh) 10 Yrs. 5 Yrs. to 24-26 restaurant issue has continued to be a sales trends in China are one potential Sales 11.5% 12.5% 10.0% "Cash Flow 15.0% decent performer since our May write-up, negative in the near term, especially with 12.5% 12.5% Earnings 16.5% 9.5% 16.0% tacking on another roughly 3% in value concerns mounting that there may be a Dividends .. 22.5% 10.0% over the three-month span. And funda- backlash against American brands in that Book Value -- NMF mentals at the company have continued to important market. China comps are still Fiscal QUARTERLY SALES ($ mill.) A Full Year er der Dec.Per Mar.Per Jun.Per Sep.Per Vear recently reported third quarter of fiscal Fiscal improve, with headline numbers for the more than healthy, however. (They ad- Ends vanced 19% during the June stanza.) And 2018 6073,7 6031.8 6310.3 6303.7 24719.5 2021 (ended June 27th) coming in marked- Starbucks remains well positioned in the ) 2019 6632.7 6305.9 6823.0 6747.0 26508.6 ly better than anticipated. In fact, share country, with a long runway of unit- 2020 7097.1 5995.7 4222.1 6203.1 23518.0 net of $1.01 for the period trounced our es- development opportunities. The domestic 2021 (6749.4 6668.0 7496.5 8286.1 29200 timate and Wall Street's consensus view of business, meanwhile, should still be a 2022 8000 7650 8250 8400 32300 $0.78, even as operating conditions powerful growth catalyst, as the company Fiscal EARNINGS PER SHARE ABF Feel remained on the challenging side in some further leverages its loyalty program and Full Year Ends Dec.Per Mar.Per Jun.Per Sep.Per Vear parts of the world. The earnings beat was industry-leading digital platform. Notably, 2018 .65 .53 .62 .62 2.42 driven by strong domestic sales of innova- too, the company maintains excellent pric- 2019 .75 ,60 .78 .70 -2.83 tive cold beverages, like the popalar Nitro ing power, which should help it to offset 2020 .79 .32 d.46 .51 H1.17 cold brew, which helped lift U.S. comps by any inflationary headwinds. All in all, we 2021 .61 .62 1.01 1.01 3.25 2022 1.00 .85 1.10 1.15 4.10 10% on a two-year basis. Starbucks also now envision share earnings reaching continued to see good momentum from its $3.25 and $4.10 in fiscal 2021 and fiscal Cal- QUARTERLY DIVIDENDS PAID G endar Mar.31 Jun.30 Sep.30 Dec.31 Year in the U.S. rising 48% year over year, to least $5.25 by mid-decade. Full loyalty program, with active membership 2022, respectively, before heading to at 2017 .25 .25 .25 .30 1.05 24.2 million. And the company registered The stock appears a little pricey, sug. 2018 .30 .30 .36 36 1.32 2019 .36 36 .36 nice gains abroad, though a COVID-19 up- gesting that most investors should .41 1.49 2020 .41 .41 .41 tick in Japan and a slower-than-expected wait for a better entry point before .45 1.68 2021 .45 .45 .45 turnaround in the China business committing more funds to this name. hampered the international segment a bit. Justin Hellman (A) Fiscal year ends on the Sunday closest to cupancy costs. (E) Includes company-operated April, July, and October. (H) Does not sum due Company's Financial Strength August 20, 2021 September 30th (B) Diluted earnings. Next stores only. (F) Includes stock-based com- to rounding. samnings report is due in late October. (C) In pensation starting in '06. (G) Dividend initiated A. millora, adjusted for split. (D) Includes oc-3/10. Payments typically made in January, Stock's Price Stability 90 Price Growth Persistence AS Line. from to be relable and provided without ol kind THE PURUSHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for Subscriber's own, non-commercial, internal use. Auk part to subscribe call 1-800-VALUELINE Earnings Predictability 50 inayod ktored or transmited in any printed, electronic or other form, or used for generating or marketing any printed or Hectronic publication, service of product DVD STARBUCKS CORP. NDO-SBUX RECENT 117.94 30.5(9) RELAIME 1.60 1.7% LINE Tring 1938 128 TOT 1265 Target Price Range 2024 2025 2026 o ST 50 ao 526 361 1. SAFETY 1 215 LO LEGENDS 18 120 100 -80 8888 888 8 8 prt sc + prema -50 40 30 20 _ Return . TOT. RETURN 7/21 Thes VL ARTS STOCK NOEK ty 61.6 3 y. 144 48.6 syr 1294 955 80 7.08 8.87 10.97 1.85 3.53 4.11 1.56 2.61 1.91 1.17 4.10 Earnings per shop 281 206 1.00 36.45 6.75 5.25 2.60 2.65 1125.0 25.0 1.40 enter 42 52 120 R9 1.44 d5 DIES 277 232 Value Line 41000 30.5% 24.0% 5905 50% ( PE TIMELINESS 3 3 TECHNICAL 301 HETA 11.00 M 30 18-Month Target Price Range Low-High Midpoint" to Mid S$162 3135 (15%) om 2024-26 PROJECTIONS packspace Price An't Total Quin High 145 145 (+25 Low 120 7 WIN () 33 Institutionel Decisions 2009 to By 1 tel 990 1185 1101 Percent 8 21 AB783814 81010011395 suara 912 Tiraded 20 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 VALUE UNE PUS, LLCI 24-26 2235 20.04 2685 27.75 Sales per sh 18.88 5.15 6.37 705 58 12.00 14.5 15.64 9.89 7.85 6.58 7.21 455 2.40 54 5.45 "Cash Flow"per sh rat 64 .77 7a 1.01 .75 221 1.29 1.14 31 37 3.25 242 44 2.83 30 40 1.13 54 1.36 90 1.58 1.80 2.00 Div ds Decl'd per sh 1.64 -- 64 26 80 12 34 04.30 Book Value per sh 1.36 1.47 1.55 1.69 2.05 2.48 298 341 4.03 3.52 915632 TANG 1719 120 121 122 123 1561 282 286805131900 1826 1175.0 1766. Common Shs Outst go NMF Boldre are Avg Ann' PE Ratio 46,6 36.3 30 26.4 275 251 229 16011871223 26.5 27.9 304 10 Relative P/E Ratio NME 1.42 2.30 1.25 1.33 1.60 1.39 2.46 1.52 1.59 1.49 1.75 2.0% 1.47 1.07 1.19 1.43 ette 2.09 Avg Ann'l Div'd Yield .. 2.2% 1.9% 1.0% 1.5% 1.4% 1.4% 1.4% % 1.3% 14% 1.8% Tsi 29200 32300 Sales (mill) CAPITAL STRUCTURE as of 6/27/21 2650923518 1170113300 16448 14832 19160 21318 2238724720 Total Debt $14618.1 mil. Due in 5 Yrs 57000.0 28.9% 22.2% 29.5% 31.0% Gross Margin 23.9% 23.6% 25.3% 27.3% 28.7% 30.6% 29.9% 28.8% mit 22.4% 15.2" 22.5% 22.5% 200% Operating Margin 24.0% 17.5% 17.6% 19.0% 21,3% 22.4% 24.5% 24.2% 23.1% E 20000 hift LT Debt $13619.2 mil. LT Interest $675,0 mil. 9031 15834 16837 17200 17800 Number of Stores e 10194 1071312235 12711 9405 13275 15341 (more than 100% of Cap) 1382.7 3820 4780 Net Profit ($mil) 1173.6 1384.9 1721.4 2068,1 2393.9 2835.0 3011.0 3370.0 3492.4 25.0% Leases, Uncapitalized Annual rentals $1340.6 22.0% 22.0% Income Tax Rate 32.0% 32.85 32.6% % 32.6% 34.6% 34.0% 33.0% 33.3% 24.8% 19.4% 20.6% 14.4% % mW 100% 10.4% 11.6% 12.6% 12,5% 13.3% 13.4% % 13.4% 13.8% 13.2% 5,9% 13.1% 14.8% Net Profit Margin No Defined Benefit Pension Plan 2000 1719.1 250 500 Working Cap'l (Smil) 699.2 213.6 10627 6810.0 0514.8 458.6 1719.1 1989.8 28142 1130.0 13500 13500 Long-Term Debt (Smlll) 15000 - 549.5 32022 39326 9090.2 11167 14660 549.6 1299.4 2048.3 2347.5 3202.2 3932.6 9090.2 Pld Stock None . 3000 4387 3 5114.5 6196.5 5273.7 5819.8 5884,0 5450.1 1169.5 062322 07805.1 06800 15000 Shr. Equity (Smil) 35.0% % 62.0% 60.0% Return on Total Capi 24.18 24.7% 23.2% 26.7% 29.7% 31.6% 32.8% 33.7% 73,1% 23.1% Common Stock 1.179.1 mill shs. NMF NMF NMF 55.2% NME 48.2% 55.2% NMF NMF Return on Shr. Equity as of 7/21/21 26.8% 27.1% 27.8% 39.2% 41.1% 48.2% % NME NMF NMF MARKET CAP: $139 billion (Large Cap) NMF NMF NMF Retained to Com Eq 17.9% 17.0% 17.6% 24.4% 25.2% 29.2% 28.6% 33% NMF 38% 39% CURRENT POSITION 2019 2020 6/27/21 42% 37% 37% 49% 52% 50% 55% 49% All Divds to Net Prof (SMILL) Cash Assets 2757.1 4632.1 4906.7 BUSINESS: Starbucks Corp. is the leading retailer, roaster, and joint ventures with Pepsi-Cola and Dreyer's to develop bottled col- Receivables 883.4 9112 Inventory (FIFO) 1529.2 1551.4 15482 brand of specially coffee in the world. Sells whole bean coffees tee drinks and ice creams, respectively. Deal with Kraft to distribute Other 488.2739.5 565.6 565,6 through its specialty sales group, mail-order business, super- coffee in grocery stores terminated in 2/11. Has about 346,000 em- Current Assets 5653.97806,4 7931.7 markets, and online. Has 9,860 company-owned stores in the ployees. Oft/Dir own less than 1% of common stock (1/21 proxy). . .: , , Accts Payable . 11807 9978 11270 Americas and 7,013 elsewhere. Also has 16,422 licensed stores CEO: Kevin Johnson, Inc.: WA. Addr: 2401 Utah Ave. So., Seattle, 4979.0 6348.9 6672.8 worldwide. Retail sales: 91% of 20 total, CPG and other, 9%. Has WA 98134. Tel: 206-447-1575, Internet: www.starbucks.com. Other . , . . Current Liab. 6168.7 7346.8 7799.8 Results at coffee powerhouse Star- We're very upbeat about the growth ANNUAL RATES Past Past Est'd *18-20 bucks are bouncing back sharply. The prospects here. Softening same-store of change (per sh) 10 Yrs. 5 Yrs. to 24-26 restaurant issue has continued to be a sales trends in China are one potential Sales 11.5% 12.5% 10.0% "Cash Flow 15.0% decent performer since our May write-up, negative in the near term, especially with 12.5% 12.5% Earnings 16.5% 9.5% 16.0% tacking on another roughly 3% in value concerns mounting that there may be a Dividends .. 22.5% 10.0% over the three-month span. And funda- backlash against American brands in that Book Value -- NMF mentals at the company have continued to important market. China comps are still Fiscal QUARTERLY SALES ($ mill.) A Full Year er der Dec.Per Mar.Per Jun.Per Sep.Per Vear recently reported third quarter of fiscal Fiscal improve, with headline numbers for the more than healthy, however. (They ad- Ends vanced 19% during the June stanza.) And 2018 6073,7 6031.8 6310.3 6303.7 24719.5 2021 (ended June 27th) coming in marked- Starbucks remains well positioned in the ) 2019 6632.7 6305.9 6823.0 6747.0 26508.6 ly better than anticipated. In fact, share country, with a long runway of unit- 2020 7097.1 5995.7 4222.1 6203.1 23518.0 net of $1.01 for the period trounced our es- development opportunities. The domestic 2021 (6749.4 6668.0 7496.5 8286.1 29200 timate and Wall Street's consensus view of business, meanwhile, should still be a 2022 8000 7650 8250 8400 32300 $0.78, even as operating conditions powerful growth catalyst, as the company Fiscal EARNINGS PER SHARE ABF Feel remained on the challenging side in some further leverages its loyalty program and Full Year Ends Dec.Per Mar.Per Jun.Per Sep.Per Vear parts of the world. The earnings beat was industry-leading digital platform. Notably, 2018 .65 .53 .62 .62 2.42 driven by strong domestic sales of innova- too, the company maintains excellent pric- 2019 .75 ,60 .78 .70 -2.83 tive cold beverages, like the popalar Nitro ing power, which should help it to offset 2020 .79 .32 d.46 .51 H1.17 cold brew, which helped lift U.S. comps by any inflationary headwinds. All in all, we 2021 .61 .62 1.01 1.01 3.25 2022 1.00 .85 1.10 1.15 4.10 10% on a two-year basis. Starbucks also now envision share earnings reaching continued to see good momentum from its $3.25 and $4.10 in fiscal 2021 and fiscal Cal- QUARTERLY DIVIDENDS PAID G endar Mar.31 Jun.30 Sep.30 Dec.31 Year in the U.S. rising 48% year over year, to least $5.25 by mid-decade. Full loyalty program, with active membership 2022, respectively, before heading to at 2017 .25 .25 .25 .30 1.05 24.2 million. And the company registered The stock appears a little pricey, sug. 2018 .30 .30 .36 36 1.32 2019 .36 36 .36 nice gains abroad, though a COVID-19 up- gesting that most investors should .41 1.49 2020 .41 .41 .41 tick in Japan and a slower-than-expected wait for a better entry point before .45 1.68 2021 .45 .45 .45 turnaround in the China business committing more funds to this name. hampered the international segment a bit. Justin Hellman (A) Fiscal year ends on the Sunday closest to cupancy costs. (E) Includes company-operated April, July, and October. (H) Does not sum due Company's Financial Strength August 20, 2021 September 30th (B) Diluted earnings. Next stores only. (F) Includes stock-based com- to rounding. samnings report is due in late October. (C) In pensation starting in '06. (G) Dividend initiated A. millora, adjusted for split. (D) Includes oc-3/10. Payments typically made in January, Stock's Price Stability 90 Price Growth Persistence AS Line. from to be relable and provided without ol kind THE PURUSHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for Subscriber's own, non-commercial, internal use. Auk part to subscribe call 1-800-VALUELINE Earnings Predictability 50 inayod ktored or transmited in any printed, electronic or other form, or used for generating or marketing any printed or Hectronic publication, service of product