Using the data from the Intrinsic Value ofthe ULTAFirm (see attached), provide a brief summary and calculations ofthe firm's Free Cash Flow and CAPM valuation models and outcomes. Address the assumptions implicit in the models themselves as well as those you made during the valuation process. Why might these estimates differ from the actual stick price today? Explain.

Valuation and qualifying accounts Description Balance at beginning of period Charged to costs and Deduction expenses s (In thousands) Balance at end of period $ 1,346 $ 2,063 $ 1,112 11,598 29,894 (26,233) 15,259 5,253 3,323 (3,573) 5,003 5,935 (6,072) (1,926) 55,423 (53,671) 4,187 Fiscal 2015 Allowance for doubtful accounts $ (2,297)(a) Shrink reserve Inventory lower of cost or market reserve Insurance: Workers Comp / General Liability Prepaid Asset (1,789)(b) Employee Health Care Accrued Liability 2,435 Fiscal 2014 Allowance for doubtful accounts $ 915 $ 874 $ (443)(a) $ 1,346 Shrink reserve 9,358 22,374 (20,134) 11,598 4,861 4,368 (3,976) 5,253 6,899 (6,871) (1,789) 41,335 (41,506) 2,435 Inventory lower of cost or market reserve Insurance: Workers Comp / General Liability Prepaid Asset (1,817)(b) Employee Health Care Accrued Liability 2,606 Fiscal 2013 Allowance for doubtful accounts $ 973 $ 300 $ (358)(a) $ 915 Shrink reserve 4,020 16,298 (10,960) 9,358 2,364 4,522 (2,025) 4,861 7,060 (6,477) (1,817) 34,422 (34,048) 2,606 Inventory lower of cost or market reserve Insurance: Workers Comp / General Liability Prepaid Asset (2,400)(b) Employee Health Care Accrued Liability 2,232 (a) Represents write-off of uncollectible accounts (b) Represents prepaid insurance Ulta Salon, Cosmetics & Fragrance, Inc. Consolidated Statements of Stockholders' Equity Common Stock (In thousands) Balance February 2, 2013 Issued Shares Additional Paid-In Capital Treasury Common Stock Amount 64,56 5 $ 645 Treasury Shares Retained Earnings Total Stockholders' Equity Amount (556) $ (7,494) $496,930 $ 296,861 $ 786,942 Stock options exercised and other awards 729 7 (6) (631) 21,883 202,849 21,890 Purchase of treasury shares Net income (631) 202,849 Excess tax benefits from stock-based compensation 13,378 13,378 16,003 16,003 (501) (5) Stock compensation charge Repurchase of common shares Balance February 1, 2014 64,79 3 $ 647 (37,332) (562) $ (8,125) $548,194 $ 462,378 $ (37,337) 1,003,09 4 Stock options exercised and other awards 290 3 (16) (321) 10,636 10,639 (1,588) 257,135 257,135 3,229 3,229 14,923 14,923 (3) Purchase of treasury shares (1,588) Net income Excess tax benefits from stock-based compensation Stock compensation charge Repurchase of common shares Balance January 31, 2015 64,76 2 $ 647 (39,920) (578) $ (9,713) $576,982 $ 679,593 $ (39,923) 1,247,50 9 Stock options exercised and other awards 403 4 (13) 19,642 19,646 (1,972) 320,008 320,008 9,497 9,497 15,594 15,594 (10) Purchase of treasury shares (1,972) Net income Excess tax benefits from stock-based compensation Stock compensation charge Repurchase of common shares (1,034) Balance January 30, 2016 64,13 1 $ 641 (167,386) (167,396) (591) $(11,685) $621,715 $ 832,215 $ 1,442,88 6 Ulta Salon, Cosmetics & Fragrance, Inc. Consolidated Statements of Cash Flows January 30, Fiscal year ended January 31, February 1, 2016 2015 2014 $ 320,008 $ 257,135 $ 202,849 165,049 131,764 106,283 (In thousands) Operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Deferred income taxes 5,809 9,246 3,868 15,594 14,923 16,003 (9,497) (3,229) (13,378) 3,690 4,468 3,902 (12,552) (5,391) (5,534) (180,564) (123,296) (96,808) (6,000) (10,555) (5,541) 2,795 7,284 18,673 5,396 42,496 29,396 37,926 37,644 14,215 27,662 32,497 53,627 558 1,606 170 375,874 396,592 327,725 Non-cash stock compensation charges Excess tax benefits from stock-based compensation Loss on disposal of property and equipment Change in operating assets and liabilities: Receivables Merchandise inventories Prepaid expenses and other current assets Income taxes Accounts payable Accrued liabilities Deferred rent Other assets and liabilities Net cash provided by operating activities Investing activities Purchases of short-term investments (130,000) (200,209) 150,209 50,000 (299,167) (249,067) (226,024) (278,958) (399,276) (226,024) (167,396) (39,923) (37,337) 19,646 10,639 21,890 9,497 3,229 13,378 (1,972) (1,588) (631) (140,225) (27,643) (2,700) (43,309) (30,327) 99,001 389,149 419,476 320,475 $ 345,840 $ 389,149 $ 419,476 Proceeds from short-term investments Purchases of property and equipment Net cash used in investing activities Financing activities Repurchase of common shares Stock options exercised Excess tax benefits from stock-based compensation Purchase of treasury shares Net cash used in financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental cash flow information Cash paid for income taxes (net of refunds) $ 179,248 $ 137,180 $ 101,598 $ $ $ Noncash investing activities: Change in property and equipment included in accrued liabilities 13 8,588 (3,161) See accompanying notes to financial statements. Ulta Salon, Cosmetics & Fragrance, Inc. Consolidated Statements of Income Fiscal year ended (In thousands, except per share data) January 30, 2016 January 31, 2015 Net sales $3,924,116 Cost of sales $ 3,241,36 9 February 1, 2014 $ 2,670,57 3 2,539,783 2,104,58 2 1,729,32 5 1,384,333 1,136,78 7 941,248 863,354 712,006 596,390 14,682 14,366 17,270 506,297 410,415 327,588 Gross profit Selling, general and administrative expenses Pre-opening expenses Operating income Interest income, net (1,143) (894) (118) Income before income taxes 507,440 411,309 327,706 187,432 154,174 124,857 $ 320,008 $ 257,135 $ 202,849 $ 5.00 $ 4.00 $ 3.17 $ 4.98 $ 3.98 $ 3.15 Income tax expense Net income Net income per common share: Basic Diluted Weighted average common shares outstanding: Basic 63,949 64,335 63,992 64,275 64,651 64,461 Diluted Ulta Salon, Cosmetics & Fragrance, Inc. Consolidated Balance Sheets (In thousands, except per share data) January 30, 2016 January 31, 2015 $ 345,840 $ 389,149 130,000 150,209 64,992 52,440 761,793 581,229 72,548 66,548 20,780 1,375,17 3 1,260,355 847,600 717,159 8,145 5,656 2,230,91 8 $1,983,170 Assets Current assets: Cash and cash equivalents Short-term investments Receivables, net Merchandise inventories, net Prepaid expenses and other current assets Deferred income taxes Total current assets Property and equipment, net Deferred compensation plan assets Total assets $ Liabilities and stockholders' equity Current liabilities: Accounts payable $ 196,174 $ 190,778 187,351 149,412 12,702 19,404 396,227 359,594 321,789 294,127 59,527 74,498 10,489 7,442 788,032 735,661 641 647 Accrued liabilities Accrued income taxes Total current liabilities Deferred rent Deferred income taxes Other long-term liabilities Total liabilities Commitments and contingencies (note 4) Stockholders' equity: Common stock, $.01 par value, 400,000 shares authorized; 64,131 and 64,762 shares issued; 63,540 and 64,184 shares outstanding; at January 30, 2016, and January 31, 2015, respectively Treasury stock-common, at cost (11,685) (9,713) Additional paid-in capital 621,715 576,982 Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 832,215 679,593 1,442,88 6 1,247,509 2,230,91 8 $1,983,170 As of January 30, 2016, we operated 874 stores across 48 states. The following tables present the components of our consolidated results of operations for the periods indicated: Fiscal year ended (Dollars in thousands) January 30, 2016 January 31, 2015 February 1, 2014 $3,924,116 $3,241,369 $2,670,573 2,539,783 2,104,582 1,729,325 1,384,333 1,136,787 941,248 863,354 712,006 596,390 14,682 14,366 17,270 506,297 410,415 327,588 Net sales Cost of sales Gross profit Selling, general and administrative expenses Pre-opening expenses Operating income Interest income, net (1,143) (894) (118) Income before income taxes 507,440 411,309 327,706 187,432 154,174 124,857 $ 320,008 $ 257,135 $ 202,849 874 774 675 10.0% 8.1% 6.1% 47.5% 56.4% 76.6% 11.8% 9.9% 7.9% Income tax expense Net income Other operating data: Number of stores end of period Comparable sales increase: Retail and salon comparable sales E-commerce comparable sales Total comparable sales increase Fiscal year ended (Percentage of net sales) January 30 , 2016 January 31 , 2015 February 1, 2014 Net sales 100.0% 100.0% 100.0% 64.7% 64.9% 64.8% Cost of sales Gross profit 35.3% 35.1% 35.2% 22.0% 22.0% 22.3% 0.4% 0.4% 0.6% 12.9% 12.7% 12.3% 0.0% 0.0% 0.0% 12.9% 12.7% 12.3% 4.8% 4.8% 4.7% 8.2% 7.9% 7.6% Selling, general and administrative expenses Pre-opening expenses Operating income Interest income, net Income before income taxes Income tax expense Net income Fiscal year 2015 versus fiscal year 2014 Net sales Net sales increased $682.7 million, or 21.1%, to $3,924.1 million in fiscal 2015 compared to $3,241.4 million in fiscal 2014. Salon service sales increased $33.7 million, or 19.2% to $209.2 million compared to $175.5 million in fiscal 2014. E-commerce sales increased $71.2 million, or 47.5%, to $221.1 million compared to $149.9 million in fiscal 2014. The net sales increases are due to the opening of 100 net new stores in 2015 and a 11.8% increase in comparable sales. Non-comparable stores, which include stores opened in fiscal 2015 as well as stores opened in fiscal 2014, which have not yet turned comparable, contributed $306.5 million of the net sales increase, while comparable stores contributed $376.2 million of the total net sales increase. The following table presents our selected consolidated financial data. The table should be read in conjunction with Item 7, \"Management's Discussion and Analysis of Financial Condition and Results of Operations,\" and Item 8, \"Financial Statements and Supplementary Data,\" of this Annual Report on Form 10-K. January 30, 2016 Fiscal year ended(1) January 31, February 1, February 2, 2015 2014 2013 (In thousands, except per share and per square foot data) January 28, 2012 Income statement: Net sales(2) $3,924,116 Cost of sales Gross profit $ 3,241,36 9 $ 2,670,57 3 $ 2,220,25 6 $ 1,776,15 1 2,539,78 3 2,104,58 2 1,729,32 5 1,436,58 2 1,159,311 1,384,33 3 1,136,78 7 941,248 783,674 616,840 863,354 712,006 596,390 488,880 410,658 14,682 14,366 17,270 14,816 9,987 506,297 410,415 327,588 279,978 196,195 185 587 Selling, general and administrative expenses Pre-opening expenses Operating income Interest (income) expense, net (1,143) (894) (118) Income before income taxes 507,440 411,309 327,706 279,793 195,608 187,432 154,174 124,857 107,244 75,344 $ 320,008 $ 257,135 $ 202,849 $ 172,549 $ 120,264 Income tax expense Net income Net income per common share: Basic $ 5.00 $ 4.00 $ 3.17 $ 2.73 $ 1.96 $ 4.98 $ 3.98 $ 3.15 $ 2.68 $ 1.90 Diluted Weighted average common shares outstanding: Basic 63,949 64,335 63,992 63,250 61,259 64,275 64,651 64,461 64,396 63,334 Diluted Dividends declared per common share $ $ $ $ 1.00 $ Other operating data: Comparable sales increase:(3) Retail and salon comparable sales 10.0% 8.1% 6.1% 8.8% 10.9% 47.5% 56.4% 76.6% 30.7% 37.8% 11.8% 9.9% 7.9% 9.3% 11.5% E-commerce comparable sales Total comparable sales increase Number of stores end of year Total square footage end of year 874 774 675 550 449 9,225,95 7 8,182,40 4 7,158,28 6 5,847,39 3 4,747,14 8 10,556 10,572 10,605 10,632 10,573 8,724,58 1 7,690,74 2 6,555,96 0 5,315,65 3 4,413,23 6 Total square footage per store(4) Average total square footage(5) Net sales per average total square foot(6) $ 450 $ 421 $ 407 $ 418 $ 402 Capital expenditures 299,167 249,067 226,024 188,578 128,636 165,049 131,764 106,283 88,233 75,931 167,396 39,923 37,337 $ 345,840 $ 389,149 $ 419,476 $ 320,475 $ 253,738 130,000 150,209 978,946 900,761 735,886 568,257 415,377 847,600 717,159 595,736 483,059 376,985 2,230,91 8 1,983,17 0 1,602,72 7 1,275,24 9 957,217 1,442,88 6 1,247,50 9 1,003,09 4 786,942 584,704 Depreciation and amortization Repurchase of common shares Balance sheet data: Cash and cash equivalents Short-term investments Working capital(7) Property and equipment, net Total assets Total stockholders' equity