Case: Harley-Davidson Inc.: Dividend Discount Valuation

1. How would you describe Harley-Davidson's business and strategy? What are the industry growth prospects? How competitive is the business? 2. How have HOG's sales over recent years, both in the US and abroad, been impacted by its strategy and products? How have sales been impacted by external factors? 3. What are Harley-Davidson's strengths and weaknesses? What are the greatest threats and opportunities? As part of your analysis, financially size-up HOG using data in Exhibits 4 to 7. 4. As Aditi Basu, what recommendation would you make regarding the attractiveness of Harley-Davidson stock for Dimensional Wealth Group?

Harley-Davidson 2-Stage DDM Inputs Instructions quired R 8.0% Input given but can change terminal DPS growth Input growth assumption Stage 1 EPS growth 2024-26 input assumed EPS growth 2024-26 Stage 1 Div Payout 2024-26 Input dividend payout 2024-26 2018 2019 2020 2021 2022 2023 2024 2025 2026 Years from today: 2 5 8 EPS $2.92 $3.18 $3.5 $4.06 $4.34 $4.651 Inputs in yellow given but can change, create formula for orange cells using input cell C7 EPS Growth Create formulas to compute growth implied by row 11 Div Payout Create formulas to compute given rows 15 and 11 for 2019 to 2023. For 2024, div payout is based on input cell DPS $1.4 $1.50 $1.56 $1.8 $1.95 $2.10 Inputs in yellow given but can change, create formula for orange cells DPS Growth Create formulas to compute growth implied by row 15 Model Calculations and Output Terminal Value in 2023 Create forumula to determine TV in 2026 (based on year 2027 on dividends) PV of Stage 1 DPS Create formulas to compute present value of DPS from row 17 PV of Terminal value Create formula to compute present value (2018) of TV in cell J20 Price per share (PPS) Create formula to sum present values in rows 24 and 25 % of PPS from Terminal Value Create formula to determine percent of final value coming from TV Actual price $44.48Harley-Davidson DDM Inputs Instructions Required Return 8.0% Input given (8%) given but can change DPS Growth Input growth assumtion 2018 DPS $1.47 Given 2019 DPS $1.50 Input given ($1.5) given but can change Outputs Price per share (PPS) Input formula to value HOG using yellow input cells Actual price $44.48 DPS growth given actual price Build formula to determine growth rate given present priceHarley-Davidson 2-Stage DDM Inputs Instructions Required Return 8.0% Input given but can change terminal DPS growth Input growth assumption 2018 2019 2020 2021 2022 2023 Years from today: 2 3 5 EPS $2.92 $3.18 $3.56 $4.06 $4.34 $4.65 Inputs given but can change EPS Growth Create formulas to compute growth implied by row 11 Div Payout Create formulas to compute given rows 15 and 11 DPS $1.47 $1.50 $1.56 $1.80 $1.95 $2.10 Inputs given but can change DPS Growth Create formulas to compute growth implied by row 15 Model Calculations and Output Terminal Value in 2023 Create forumula to determine TV in 2023 (base on year 2024 on dividend PV of Stage 1 DPS Create formulas to compute present value of DPS from row 15 PV of Terminal value Create formula to compute present value (2018) of TV in cell G20 Price per share (PPS) Create formula to sum present values in rows 22 and 23 % of PPS from Terminal Value Create formula to determine percent of final value coming from TV Actual price $44.48