Calculate the WACC to be used as the discount rate to Present Value the cash flows for NS. (See Pointers below for assumptions to use in order to calculate the Cost of equity (Re), and WACC.) Using the financial projections in Exhibit 6 of the case and the WACC that you just calculated, determine the stand-alone intrinsic value of NS shares. Other Details: Risk Free Rate= 2.9% (Found in Exh. 11 of case) EMRP=5.5% Beta=1.16 Tax rate=36% Note this should also be used for the DCF analyses Target Capital Structure=20% debt and 80% equity (this is deemed to be average for the Railroad industry)

Required (pre-tax) Return on Debt= 3.7 (Below values in million) Cash = $433, Equity(market value)= $23,027 Debt= $9496,

Exhibit 6 Norfolk Southern Projections on a Stand-alone Basis, October 2015 ($ millions) Est. 2015 2016 Projected (period ending 12/31) 2017 2018 2019 2020 2021 Income statement items Revenue Growth rate (%) $10,649 $10,698 0.5% $11,175 4.5% $11,671 4.4% $12,191 4.5% $12,871 2.5% Operating expenses Depreciation [1] EBIT $6,548 $1,049 $3,052 71% $6,397 $1,091 $3,210 70% $6,570 $1,135 $3,470 $6,808 $1,180 $3,683 68% $7,049 $1,227 $3,915 68% $12,557 3.0% $7,139 $1,300 $4,118 67% $7,440 $1,313 $4,118 Operating ratio 69% 68% Balance sheet items Capital expenditures Net working capital [2] $2,365 ($192) $2,070 ($128) $1,910 ($134) $1,930 ($140) $1,930 ($146) $1,949 ($151) $1,969 ($154) Source: Compiled from UBS Global Research, Norfolk Southern Corporation, October 28, 2015; and casewriter estimates