Kohler DCF

Annex I: Discounted Cash Flow and WACC calculation DCF Valuation Approach 1 Operating Income after Depreciation 2 Less: Tax 3 NOPAT

1998a 102,688 (45,451) 57,237

Tax Rate 1999 126,032 (54,724) 71,308

2000 171,619 (74,518) 97,101

2001 187,978 (81,621) 106,357

2002 201,604 (87,537) 114,067

4 Depreciation and Amortization 5 Purchase of Property, Plant and Equipment 6 Net Change in Working Capital

56,113 (87,691) (1,435)

87,661 (97,205) (5,762)

91,786 (96,971) (27,705)

94,593 (96,811) (17,702)

97,355 (106,647) (23,145)

7 Free Cash Flow (Firm) 8 PV of Free Cash Flow 9 Terminal Value

24,224 23,449 809,161

56,002 48,491

64,211 50,510

86,437 61,770

81,630 52,995

10 11 12 13 14

15 16 17 18

Total Valuation (DCF) Total Debt Equity Valuation Total Shares Per Share Value (Thousands)

1,046,376 232,444 813,932 7,587.89 107.27

DCF Valuation Approach - Includes Liquidity & Minority Discount 1998a Liquidity Discount 22.50% Per Share Value (Thousands) 83.13 Minority Discount 39.50% Per Share Value (Thousands) - Adjusted 50.29

Exhibit 6b - Calculation 1998a 1999 44.26% 43.42%

Growing Perpetuity - Continuing Value TV Assumption 90,922 Reinvestment Rate 3.00% Rate (WACC) 10.08% Growth Rate 3.00% Continuing Value * $ 1,246,385

2000 43.42%

2001 43.42%

2002 43.42%

WACC Calculation T: 43.4% Rd: 6.60% MRP: 5.00% rf: 5.64% B: 1.03 Re: 10.78%

Assumption Assumption Calculation Assumption

* CVH = E(NOPATH+1) * (1 - b) / r - g

E/V: D/V:

90.00% 10.00%

WACC **

10.08%

given given given Exhibit 8 Calculated Calculated

** WACC = (E/V) x Re + (D/V) x (Rd x (1 - T))

1999

2000

2001

2002

COMPS - BA => BE Calculation American Standard Total Debt 2,404.0 MV of Equity 3,502.2 Debt + Equity 5,906.2 DV EV

American Woodmark 13.4 236.3 249.7

40.70% 59.30%

Masco 1,187.9 9,838.8 11,026.7 10.77% 89.23%

Briggs & Stratton 259.6 1,109.3 1,368.9 18.96% 81.04%

Cummins Engine 1,250.0 2,285.9 3,535.9 35.35% 64.65%

Detroit Diesel 107.4 568.1 675.5 15.90% 84.10%

Average 870.4 2,923.4

24.34% 75.66%

NOTES: 1

Exhibit 6b

2

Operating Income after Depreciation x (1-T)

3

Operating Income after Depreciation - Tax

4

Exhibit 6c

5

Exhibit 6c: Purchase/Sale of PP&E (Net Capex)

6

Exhibit 6c: SUM of Increase/Decrease: AR, Inventory, Future Income Tax Benefits, Prepaid Expenses and other Assets, AP& Accrued Expenses

7

NOPAT + Operating Income after Depreciation - Net Capex - Net Change in Working Capital

8

1998: FCF / ((1 + WACC x 8/12)^0.5) 1999: FCF / ((1 + WACC)^1.5) 2000: FCF / ((1 + WACC)^2.5) 2001: FCF / ((1 + WACC)^3.5) 2002: FCF / ((1 + WACC)^4.5)

9

Continuing Value / ((1 + WACC)^4.5)

10

Continuing Value + SUM PV of FCF

11

Exhibit 3a: 1998 Current Maturities LTD + LTD

12

Total Valuation (DCF) - Total Debt

13

Exhibit 5: Total Shares Outstanding

14

Equity Valuation / Total Shares

15

Note on Valuring Control and Liquidity in Family and Closely Held Firms: Range 20-25% (Value Stated is an Average)

16

Unadjusted Per Share Value x (1 - Liquidity Discount)

17

Note on Valuring Control and Liquidity in Family and Closely Held Firms: Range 36-49% (Value Stated is an Average)

18

Liquidity Discount Per Share Value x (1 - Minority Discount)

B over last 36 months Unlevered B (Asset) Relevered BE

0.82 0.49 1.03

0.76 0.72

1.28 1.14

0.66 0.53

1.09 0.70

1.30 1.09

0.79