RJR Nabisco Valuation Xlsx

Valuing the cash flows to capital under the pre-bid plan when interest tax shields are in (millions of dollars except per share data) 1989

1990

1991

Cash Flows available for capital payments [a]

517

948

1399

Cash Interest [a]

582

662

693

1099

1610

2092

Discount Rate [c]

14.6

14.6

14.6

Cumulative discount factor [d]

0.87

0.76

0.66

0

2

4

13553

13553

13553

8008

9279

11030

Less: Assumed Debt

21561

22832

24583

Net Value

16357

17628

19379

71

77

85

Cash Flows

Cash Flows available for capital [b]

Present Value Valuation Growth in cash flows after 1998 Present value of cash flows, 1989-98 Present Value of terminal value [e]

Net Value per share [f]

a=case exhibit 5 b=cash flows available for capital equal cash flows available for capital payments plus cash interes c=discount rate is computed using the CAPM, with an unlevered asset beta of 0.70, a risk-free rate d=the cumulative discount factor for each year is the present value of $1 received at the end of th e=calculated as the present value in 1988 of a growing perpetuity of the 1998 cash flow available f=assumes 229 million shares outstanding

st tax shields are included in the cash flows

1992

1993

1994

1995

1996

1997

1998

2073

2551

2869

3253

3617

4075

4589

690

658

594

458

410

259

-21

2763

3209

3463

3711

4027

4334

4568

14.6

14.6

14.6

14.6

14.6

14.6

14.6

0.58

0.51

0.44

0.39

0.34

0.29

0.26

ments plus cash interest of 0.70, a risk-free rate of 9% and a risk premium of 8% ceived at the end of the year 98 cash flow available to capital

Cost of capital under the pre-bid plan using tax-adjusted discount rates (millions of doll Assumptions Unlevered asset beta = 0.70 Assumed debt beta = 0 Risk free rate = 9% after tax expected return [a]=5.9% risk premium = 8% Beginning of year book values Assumed debt Market Value of equity [b] value of rjr nabisco Equity beta [c] 0.98 cost of equity [d] (in %) WACC [in %]

1989 5204 12790 17994

1990 4894 14949 19843

1991 4519 17405 21924

1992 3798 20199 23997

0.98 16.9 13.7

0.94 16.5 13.8

0.89 16.1 14

0.84 15.7 14.1

a=cost of debt is assumed to be the risk free rate because the beta of the debt is assumed to be z b= the market value of equity is assumed to grow at the cost of equity c= the levered equity beta (beta-e)=E/V[beta-a], where E is the market value of jr nabisco and bet d=caculated using the CAPM

count rates (millions of dollars)

1993 3982 23361 26343

1994 2582 26939 29521

1995 1854 31016 32870

1996 0 35649 35649

1997 0 40853 40853

1998 0 46818 46818

0.8 15.4 14.3

0.77 15.2 14.3

0.75 15 14.4

0.7 14.6 14.6

0.7 14.6 14.6

0.7 14.6 14.6

of the debt is assumed to be zero. The tax rate is 34%

ket value of jr nabisco and beta-a is the unlevered asset beta

Valuing the cash flows for capital under the pre bid plan using tax adjusted discount rat Cash Flows 1989 1990 1991 Cash flows available for capital payments 517 948 1399 After tax cash interest 384 437 457 Cash flows available for capital© 901 1385 1856 WACC(d) 13.7% 13.8% 14.0% Cumulative discount factor 0.88 0.77 0.68 Present value 792.88 1066.45 1262.08 As per sheet 1070 1258 Valuation Growth in cash flows after 1998 0% Present value of cash flows,1989-1998 12910 Present value of terminal value(f) 8273

Less: Assumed debt Net value Net value per share(g)

21183 5204 15979 69.777293

Assume 229 million shares outstanding Assume a 34% tax rate equals interest in Exhibit 5 times 66%

adjusted discount rates(millions of dollars except per share data) 1992 1993 1994 1995 1996 1997 2073 2551 2869 3253 3617 4075 455 434 392 302 271 171 2528 2985 3261 3555 3887 4246 14.1% 14.3% 14.3% 14.4% 14.6% 14.6% 0.59 0.52 0.45 0.4 0.35 0.3 1491.52 1552.2 1467.45 1422 1360.45 1273.8 1502 1552 1483 1412 1348 1285 2% 12910 9586

4% 12910 11395

22496 5204 17292 75.510917

24304 5204 19100 83.406114

1998 4589 -14 4575 14.6% 0.26 1208

Valuing the cash flows to capital under the managemnt group plan when interest tax sh Cash Flows Cash flows available for capital payments After tax cash interest Cash flows available for capital© WACC(d) Cumulative discount factor Present value As per shee Valuation Growth in cash flows after 1998 Present value of cash flows,1989-1998 Present value of terminal value(f)

Less: Assumed debt Net value Net value per share(g)

1989 12018 2792 14810 14.6% 0.87 12884.7 12923

1990 593 1353 1946 14.6% 0.76 1478.96 1482 0% 23982 6427

30408 5204 25204 110.06114

Assume 229 million shares outstanding Assume a 34% tax rate equals interest in Exhibit 5 times 66% Cash flows available for capital©equlas Cash flows available for capital payments plus cash interes

en interest tax sheilds are included in the cash flows(mn of dollrs exceot per share data) 1991 919 1286 2205 14.6% 0.66 1455.3 1465

ts plus cash interest

1992 1282 1183 2465 14.6% 0.58 1429.7 1429

1993 1594 1037 2631 14.6% 0.51 1341.81 1331

1994 1946 850 2796 14.6% 0.44 1230.24 1234

2% 23982 7447

4% 23982 8852

31428 5204 26224 114.51528

32833 5204 27629 120.65066

1995 2344 624 2968 14.6% 0.39 1157.52 1143

1996 2797 351 3148 14.6% 0.34 1070.32 1058

1997 3332 0 3332 14.6% 0.29 966.28 977

eot per share data) 1998 3666 0 3666 14.6% 0.26 953.16 938

TN-5 Capital structure for RJR Nabisco under the management group plan (millions of do Bank debt

Amount = $ 15000

Interest rate = 12 %

Amount = $5204

Interest Rate = 11%

Amount = $3000

Interest Rate = 14%

Amount = $ 1373

Interest Rate = 18.8%

Amount = $ 916

Interest Rate = 13 % (1989), 18.

Beginning Balance Interest Paydown Ending Balance Assumed Debt Beginning Balance Interest Paydown Ending Balance Subordinated Debt Beginning Balance Interest Paydown Ending Balance PIK Preferred Beginning Balance PIK dividends Cash Dividends Paydown Ending Balance Convertible Beginning Balance PIK dividends Cash Dividends Paydown Ending Balance

plan (millions of dollars) 1989 1990

1991

1992

1993

1994

1995

15000 1800 11708 3292

2392 395 218 3075

3075 369 198 2877

2877 345 466 2411

2411 289 1194 1217

1217 145 1217 0

0 0 0 0

5204 572 310 4894

4894 538 375 4519

4519 497 721 3798

3798 418 816 2982

2982 328 400 2584

1854 204 1854 0

0 0 0 0

3000 420 0 3000

3000 420 0 3000

3000 420 0 3000

3000 420 0 3000

3000 420 0 3000

3000 420 0 3000

3000 420 0 3000

1373 258 0 0 1632

1632 307 0 0 1938

1938 364 0 0 2303

2303 433 0 0 2736

2736 514 0 0 3259

3250 611 0 0 3861

3861 726 0 0 4587

1035 195 0

1229 231

1460 275

1735 326

2061 387

2448 460

1229

1460

1735

2061

2448

2909

= 13 % (1989), 18.8% (1990 - 1998) 916 119 0 0 1035

1996

1997

1998

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

2510 351 2510 0

0 0 0 0

0 0 0 0

4857 862 0 0 5162

5162 970 0 0 2801

2801 527 0 0 0

2909 547

3455 650

4105 772

3455

4105

TN-6 Cost of capital under management group plan using tax adjusted discount rates (m Assumptions Bank Debt beta 0 Unlevered asset Beta 0.7 after tax ra 0.06 Risk free rate 9% risk premium 8% Assumed debt: beta 0 after tax ra 0.06

Beginning of year book values (b) Assumed debt bank debt sunordinated debt preferred stock convertible preferred market value of equity © value of RJR Nabisco Equity Beta (d) Cost of Equity (e) WACC(f)

(a) (b) c

Using a 34% tax rate, after tax debt rates are calculated Exhibit TN-5 Value at the beginning of the year. Assumes that the mar

(d)

The equity beta with positive subordinated debt and pref

ed discount rates (millions of dollars) Subordinate Debt: beta 0.25 after tax ra 0.07

preferred stock beta interest rat

0.25 0.07

1989

1990

1991

1992

1993

1994

5204 15000 3000

4894 3292 3000

4519 3075 3000

3798 2877 3000

2982 2411 3000

2852 1217 3000

1373 916

1632 1035

1938 1229

2303 1460

2736 1735

3250 23061

2500

4187

5461

6905

5830

10347

27993

18039

19222

20343

21394

22457

7.3

2.7

2.2

1.8

1.5

1.3

67.50%

30.40%

26.50%

23.50%

21.30%

19.50%

11.70%

12.00%

12.20%

12.40%

12.50%

12.70%

t rates are calculated as 66% of the CAPM determined rate based on the assumed beta. Preferred stock expe

Assumes that the market value of equity begins at the management groups equity investment of $2.5 billion

dinated debt and preferred stock betas is

1995

1996

1997

1998

1854 0 3000

0 0 2510

0 0

0 0

3861 2448

4587 2909

5162 3455

2801 4105

12369

14614

17108

19916

23532

24620

25725

26822

1.1

1

0.9

0.9

18.10%

17.10%

16.40%

15.80%

12.90%

13.10%

13.30%

13.60%

med beta. Preferred stock expected returns are also calculated using the CAPM

quity investment of $2.5 billion and grows at the cosqt of equity

Valuing the cash flows to capital under the managemnt group plan when tax adjusted d Cash Flows Cash flows available for capital payments After tax cash interest Cash flows available for capital© WACC(d) Cumulative discount factor Present value As per shee Valuation Growth in cash flows after 1998 Present value of cash flows,1989-1998 Present value of terminal value(f)

Less: Assumed debt Net value Net value per share(g)

1989 12018 1843 13861 11.7% 0.9 12474.9 12411

1990 593 893 1486 12.0% 0.8 1188.8 1187

1991 919 849 1768 12.2% 0.71 1255.28 1259

0% 23375 8175

31550 5204 26346 115.04803

Assume 229 million shares outstanding Assume a 34% tax rate equals interest in Exhibit 6 times 66% Cash flows available for capital©equlas Cash flows available for capital payments plus cash interes

when tax adjusted discount rates are included in the cash flows(mn of dollrs exceot per share da 1992 1282 781 2063 12.4% 0.63 1299.69 1308

1993 1594 685 2279 12.5% 0.56 1276.24 1284

1994 1946 561 2507 12.7% 0.5 1253.5 1253

2% 23375 9580

4% 23375 11568

32955 5204 27751 121.18341

34943 5204 29739 129.86463

ments plus cash interest

1995 2344 412 2756 12.9% 0.44 1212.64 1220

1996 2797 232 3029 13.1% 0.39 1181.31 1187

1997 3332 0 3332 13.3% 0.35 1166.2 1151

1998 3666 0 3666 13.6% 0.3 1099.8 1115

f dollrs exceot per share data)

Valuing the cash flows to capital under the KKR's plan when interest tax sheilds are incl Cash Flows 1989 Cash flows available f 3732 After tax cash interest 2548 Cash flows available fo 6280 WACC(d) 14.6% Cumulative discount fa 0.87 Present value 5463.6 As per shee 5480 Valuation Growth in cash flows after 1998 Present value of cash flows,1989 Present value of terminal value(f)

Less: Assumed debt Net value Net value per share(g)

1990 3521 2103 5624 14.6% 0.76 4274.24 4283

1991 1414 1685 3099 14.6% 0.66 2045.34 2059

1992 1740 1522 3262 14.6% 0.58 1891.96 1891

0% 21872 7572

2% 21872 8774

29444 5204 24240 105.85153

30646 5204 25442 111.10044

1993 1983 1321 3304 14.6% 0.51 1685.04 1672

Discount rate is computed using the CAPM model with an unlevered asset beta of 0.7 a risk free ra Assume 229 million shares outstanding Assume a 34% tax rate equals interest in Exhibit 5 times 66% Cash flows available for capital©equlas Cash flows available for capital payments plus cash interes

nterest tax sheilds are included in the cash flows(mn of dollrs exceot per share data) 1994 2383 1088 3189 14.6% 0.44 1403.16 1532

1995 2832 806 3319 14.6% 0.39 1294.41 1401

1996 3330 487 3351 14.6% 0.34 1139.34 1283

1997 3956 21 3977 14.6% 0.29 1153.33 1166

1998 4319 0 4319 14.6% 0.26 1122.94 1106

4% 21872 10429

32301 5204 27097 118.32751

asset beta of 0.7 a risk free rate of 9% and risk premium of 8%

tal payments plus cash interest

per share data)

TN-9 capital structure for RJR Nabisco under KKR's Operating Plan (millions of dollars) Bank debt

Amount = $ 12380

Interest rate = 12 %

Amount = $5204

Interest Rate = 11%

Amount = $3500

Interest Rate = 14%

Amount = $ 1373

Interest Rate = 15% (1989-1990

Amount = $ 2518

Interest Rate = 15 % (1989-199

Beginning Balance Interest Paydown Ending Balance Assumed Debt Beginning Balance Interest Paydown Ending Balance Subordinated Debt Beginning Balance Interest Paydown Ending Balance PIK Preferred Beginning Balance PIK dividends Cash Dividends Paydown Ending Balance Convertible Beginning Balance PIK dividends Cash Dividends Paydown Ending Balance

llions of dollars) 1989

1990

1991

1992

1993

1994

1995

12380 1486 3422 8958

8958 1075 3146 5812

5812 697 693 5119

5119 614 924 4195

5195 503 1583 2612

2612 313 1983 629

629 76 629 0

5204 572 310 4894

4894 538 375 4519

4519 497 721 3798

3798 418 816 2982

2982 328 400 2582

2582 284 400 2182

2182 240 2182 0

3500 490 0 3500

3500 490 0 3500

3500 490 0 3500

3500 490 0 3500

3500 490 0 3500

3500 490 0 3500

3500 490 21 3479

2129 366 0 0 2495

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

3958 744 0 0 4702

4702 884 0 0 5586

5586 1050 0 0 6636

6636 1248 0 0 7883

= 15% (1989-1990), 17.2%(1991-1992) 1373 206 0 0 1580

1580 237 0 0 1817

1817 312 0 0 2129

= 15 % (1989-1990), 18.8% (1991 - 1998) 2518 378 0 0 2896

2896 435 0 0 3331

3331 626 0 0 3958

1996

1997

1998

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

3479 487 3330 149

149 21 149 0

0 0 0 0

0 0 0 0 0

0 0 0 0 0

0 0 0 0 0

7883 1482 0 0 9365

9365 1761 0 3806 7320

7320 1376 0 4319 4377

Cost of capital under KKR's plan using the tax-adjusted discount rates [millions of dolla Assumptions Unlevered beta = 0.70 Risk free rate = 9% Risk premium =8% Beginning of year book values [b] Assumed debt Bank debt senior subordinated debt subordinated debt converting debt preferred stock market value of equity [c] value of rjr nabisco equity beta [d] cost of equity [e] wacc [f]

1989 5204 12380 3500 0 1373 2518 1500 26475 11.1 98 11.5

a=using a 34% tax rate, after tax debt rates are calculated as 66% of the CAPM determined rate ba b= exhibit 9 c=value at the beginning of the year. Assumes that the market value of equity begins at KKR's equ

[millions of dollars] Bank debt Sub-ordinated debt converting debt Beta 0 0.25 0.25 After tax rate [a] 0.06 0.07 0.07

1990

1991

1992

1993

1994

4894 8958 3500 0 1580 2896 2970 24798 5.2 50.4 11.7

4519 5812 3500 0 1817 3331 4466 23446 3.2 34.5 11.9

3798 5119 3500 0 2129 3958 6008 24512 2.5 28.7 12

2982 4195 3500 0 0 4792 10469 26848 1.5 21.3 12.6

2582 2612 3500 0 0 5586 12695 26975 1.3 19.5 12.8

determined rate based on the assumption beta. Preferred stock expected returns are also calculated using t

begins at KKR's equity investment of $2.5 billion and grows at the cost of equity. Convertible debt becomes e

assumed debt preferred stock 0 0.25 0.06 0.07

1995

1996

1997

1998

2182 629 3500 0 0 6636 15167 28114 1.1 18 12.9

0 0 3479 0 0 7883 17903 29266 1 16.9 13.1

0 0 149 0 0 9365 20926 30441 0.9 16.2 13.4

0 0 0 0 0 7320 24324 31644 0.8 15.7 13.7

also calculated using the CAPM.

ertible debt becomes equity in 1992.

Valuing the cash flows to capital under the KKR's plan using tax adjusted discount rates Cash Flows Cash flows available for capital payments After tax cash interest Cash flows available for capital© WACC(d) Cumulative discount factor Present value As per shee Valuation Growth in cash flows after 1998 Present value of cash flows,1989-1998 Present value of terminal value(f)

Less: Assumed debt Net value Net value per share(g)

1989 3732 1682 5414 11.5% 0.9 4872.6 4854

1990 3521 1388 4909 11.7% 0.8 3927.2 3941

1991 1414 1112 2526 11.9% 0.72 1818.72 1813

1992 1740 1005 2745 12.0% 0.64 1756.8 1758

0% 21206 9628

2% 21206 11268

30834 5204 25630 111.9214

32474 5204 27270 119.08297

Discount rate is computed using the CAPM model with an unlevered asset beta of 0.7 a risk free ra Assume 229 million shares outstanding Assume a 34% tax rate equals interest in Exhibit 5 times 66% Cash flows available for capital©equlas Cash flows available for capital payments plus cash interes

sted discount rates (mn of dollrs exceot per share data) 1993 1983 872 2855 12.6% 0.57 1627.35 1625

1994 2383 718 2915 12.8% 0.5 1457.5 1565

1995 2832 532 3153 12.9% 0.45 1418.85 1503

1996 3330 321 3344 13.1% 0.39 1304.16 1442

4% 21206 13583

34789 5204 29585 129.19214

ta of 0.7 a risk free rate of 9% and risk premium of 8%

ents plus cash interest

1997 3956 14 3970 13.4% 0.35 1389.5 1382

1998 4319 0 4319 13.7% 0.31 1338.89 1322

Summary of the values of the three different rjr nabisco plans when interest tax shields are included in the cash flows (millions of dollars except per share data) Discount rate [a] cumulative discount factor [b]

1989 14.6 0.87

Valuing the cash flows to capital under the pre-bid plan [interest tax shields in cash flows] Cash flows for available for capital payments[h] [exh.5] Cash interest [exh.5] Cash flows available for capital [h] present value

517 582 1099 959

Valuing the cash flows to capital under the management group plan [interest tax shields in cash flows] Cash flows for available for capital payments[h] [exh.5] Cash interest [exh.5] Cash flows available for capital [h] present value

12018 2792 14810 12923

Valuing the cash flows to capital under KKR's plan [interest tax shields in cash flows] Cash flows for available for capital payments[h] [exh.5] Cash interest [exh.5] Cash flows available for capital [h] present value

3732 2548 6280 5480

1990 14.6 0.76

1991 14.6 0.66

1992 14.6 0.58

1993 14.6 0.51

1994 14.6 0.44

1995 14.6 0.39

1996 14.6 0.34

948 662 1610 1225

1399 693 2092 1390

2073 690 2763 1602

2551 658 3209 1624

2869 594 3463 1529

3253 458 3711 1429

3617 410 4027 1354

593 1353 1946 1482

919 1286 2205 1465

1282 1183 2465 1429

1594 10387 2631 1331

1946 850 2796 1234

2344 624 2967 1143

2797 351 3149 1058

3521 2103 5625 4283

1414 1685 3099 2059

1740 1522 3262 1891

1983 1321 3304 1672

2383 1088 3471 1532

2832 806 3637 1401

3330 487 3817 1283

1997 14.6 0.29

1998 Terminal Value [c] 14.6 0.26

Total [d] less debt [e]

4075 259 4334 1271

4589 -21 4568 1169

31288 8008

21561

5204

3332 0 3332 997

3666 0 3666 938

25109 6427

30408

5204

3956 21 3977 1166

4319 0 4319 1106

29584 7572

29444

5204

equity value [f] per share [g]

16357

71

25204

110

24240

106

TN-13 Summary of values of the three different RJR Nabisco plans using after tax adjust 1989 Valuing the cash flows to capital under the prebid plan (interest tax shield in WACC) Cash Flows Available for 517 Capital Payments (f) 384 After tax cash interest Cash Flows Available for 901 Capital WACC 13.70% Cumulative WACC 0.88 Present Value 793

Valuing the cash flows to capital under the management group plan (interest tax shield Cash Flows Available for Capital Payments 12018 After tax cash interest 1843 Cash Flows Available for Capital 13861 WACC 11.70% Cumulative WACC 0.9 Present Value 12411 Valuing the cash flows to capital under the KKR's plan (interest tax shields in WACC) Cash Flows Available for Capital Payments 3732 After tax cash interest 1682 Cash Flows Available for Capital 5414 WACC 11.50% Cumulative WACC 0.9 Present Value 4854

a b c d e f

calculated as a perpetuity of the 1998 cash flows present

plans using after tax adjusted discount rates (millions of dollars except pe share data) 1990 1991 1992 1993 1994 1995 1996 est tax shield in WACC) 948 1399 2073 2551 2869 3253 3671 437 457 455 434 392 302 271 1385

1856

2528

2985

3261

3555

3942

13.80% 0.77 1070

13.90% 0.68 1259

14.10% 0.59 1502

14.20% 0.52 1553

14.30% 0.46 1484

14.40% 0.4 1414

14.60% 0.35 1349

up plan (interest tax shields in WACC) 593 893

919 849

1282 781

1594 685

1946 561

1344 412

2797 232

1486 12.00% 0.8 1187

1768 12.20% 0.71 1259

2063 12.40% 0.63 1308

2279 12.50% 0.56 1284

2507 12.70% 0.5 1253

1756 12.90% 0.44 1220

3029 13.10% 0.39 1187

est tax shields in WACC) 3521 1388

1414 1112

1740 1005

1983 872

2383 718

2832 532

3330 321

4909 11.70% 0.8 3941

2526 11.90% 0.72 1813

2745 12.00% 0.64 1758

2855 12.60% 0.57 1625

3101 12.80% 0.5 1565

3364 12.90% 0.45 1503

3651 13.10% 0.39 1442

pt pe share data) 1997

a b 1998 Terminal VTotal

4075 171

4589 -14

4246

4575

31337

14.60% 0.3 1286

14.60% 0.26 1209

8283

3332 0

3666 0

3332 13.30% 0.35 1151

3666 13.60% 0.3 1115

3956 14

4319 0

3970 13.40% 0.35 1382

4319 13.70% 0.31 1322

c d e Less DebtEquity ValPer Share

21203

5204

15999

70

31550

5204

263465

115

30834

5204

25630

112

26882

8175

31447

9628

er Share

TN-14 Selected Operating Flows Under the three different Plans 1989 Interest Tax Shields (interest * tax rate) Pre-bid strategy KKR's Strategy Management Group's Startegy Planned Capital Expenditure Pre-bid strategy KKR's Strategy Management Group's Startegy Net Proceeds from Asste Sales Pre-bid strategy KKR's Strategy Management Group's Startegy

198 936 949

1708 774 432

0 3500 12680

After-tax operating cash flows (operating profits * (1 - tax rates) + depriciation) Pre-bid strategy 2720 KKR's Strategy 3049 Management Group's Startegy 2042

NOTE: Data for prebid strategy are from Exhibit 5; for the management group strategy fro Exhibit 6 (a) terminal values are calculated as perpetuities of the 1998 value without growth using a (b) Calculated using a 14.6% discount rate

1990

1991

1992

1993

1994

1995

1996

225 796 460

236 679 437

235 642 402

224 449 353

2 37 289

156 274 212

139 166 119

1462 556 381

1345 555 380

930 572 389

738 586 396

735 598 402

735 618 412

735 636 422

0 2700 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0

0 0 0

3352 3414 2584

3632 3639 2891

2924 3895 3118

4228 4162 3357

4560 4453 3621

4925 4771 3910

tes) + depriciation) 2993 3121 2299

ent group strategy fro Exhibit 6 and for KKR's strategy from exhibit 7 value without growth using a 14.6% discount rate

1997

1998 1998 Terminal Value (a) Present value(b)

88 7 0

-7 0 0

0 0 0

970 2800 2130

735 658 432

735 678 442

5034 4644 3024

6957 4367 2836

0 0 0

0 0 0

0 0 0

0 5110 11064

5326 5120 4229

5761 5501 4580

39458 37678 31367

29385 29096 23134