5. To date, Shorts research report recommends that Whole Foods is undervalued by the market and is a buy. In light of recent events, do you think she should continue to maintain that recommendation? Back up your analysis with a discounted cash flow valuation of Whole Foods that explicitly outlines the assumptions that are important to support your argument.

Actual Actual Actual 2011 2012 2013 Forecast Forecast 2014 2015 4.0% 7.7% 8.1% 10.5% 12.6% At Fiscal Year End Store Growth Sales Growth EBITDA Margin Tax Rate 12.2% 15.7% 8.5% 9.0% 38.1% 38.4% 10.4% 9.5% 38.8% 11.1% 9.4% 39.0% 14.0% 9.8% 39.0% 6.5 10.7 Current Asset Turnover Current Liabilities Turnover Net PP&E / Store Annual Dep. & Amort / Stor 7.0 10.5 6.4 1.00 5.6 10.9 6.5 0.93 7.0 10.5 6.7 0.94 7.1 10.5 6.7 0.94 6.7 0.94 Stores 450 400 14,351 1,352 376 Sales EBITDA Dep. & Amort. EBIT Taxes Net Income Shares Outstanding Earnings per Share 311 335 362 10,108 11,699 12,917 859 1,055 1,222 311 311 339 548 744 883 209 286 343 339 458 540 350 364 372 0.97 976 381 596 372 1.60 16,360 1,600 423 1,176 459 717 372 1.93 1.26 1.45 Current Assets Current Liabilities Net Working Capital Net PP&E 1,453 880 573 1,997 2,103 977 1,126 2,193 1,980 1,088 892 2,050 1.238 812 2,680 2,304 1,406 898 2,428 3,018 Return on Capital 13.2% 13.8% 16.3% 17.1% 18.3% Actual Actual Actual 2011 2012 2013 Forecast Forecast 2014 2015 4.0% 7.7% 8.1% 10.5% 12.6% At Fiscal Year End Store Growth Sales Growth EBITDA Margin Tax Rate 12.2% 15.7% 8.5% 9.0% 38.1% 38.4% 10.4% 9.5% 38.8% 11.1% 9.4% 39.0% 14.0% 9.8% 39.0% 6.5 10.7 Current Asset Turnover Current Liabilities Turnover Net PP&E / Store Annual Dep. & Amort / Stor 7.0 10.5 6.4 1.00 5.6 10.9 6.5 0.93 7.0 10.5 6.7 0.94 7.1 10.5 6.7 0.94 6.7 0.94 Stores 450 400 14,351 1,352 376 Sales EBITDA Dep. & Amort. EBIT Taxes Net Income Shares Outstanding Earnings per Share 311 335 362 10,108 11,699 12,917 859 1,055 1,222 311 311 339 548 744 883 209 286 343 339 458 540 350 364 372 0.97 976 381 596 372 1.60 16,360 1,600 423 1,176 459 717 372 1.93 1.26 1.45 Current Assets Current Liabilities Net Working Capital Net PP&E 1,453 880 573 1,997 2,103 977 1,126 2,193 1,980 1,088 892 2,050 1.238 812 2,680 2,304 1,406 898 2,428 3,018 Return on Capital 13.2% 13.8% 16.3% 17.1% 18.3%