Valuing the cash fows to capital under the pre-bid plan when interest tax shields are included in the cash fows(millions of dollars except per share data)1989 1990 1991Cash FlowsCash Flows available for capital payments [a] 517 9! 1"99Cash #nterest [a] 5!$ %%$ %9"Cash Flows available for capital [b] 1&99 1%1& $&9$'isco(nt )ate [c] 1*% 1*% 1*%C(m(lative disco(nt factor [d] &*!7 &*7% &*%%+resent ,al(eValuation-rowth in cash .ows after 199! & $ +resent val(e of cash .ows/ 19!909! 1"55" 1"55" 1"55"+resent ,al(e of terminal val(e [e] !&&! 9$79 11&"&1ess2 3ss(med 'ebt $15%1 $$!"$ $5!"4et ,al(e 1%"57 17%$! 19"794et ,al(e per share [f] 71 77 !5a5case exhibit 5b5cash .ows available for capital e6(al cash .ows available for capital payments pl(s cash interestc5disco(nt rate is comp(ted (sin7 the C3+8/ with an (nlevered asset beta of &*7&/ a ris90free rate of 9: and a ris9 premi(m of !:d5the c(m(lative disco(nt factor for each year is the present val(e of ;1 received at the end of the yeare5calc(lated as the present val(e in 19!! of a 7rowin7 perpet(ity of the 199! cash .ow available to capitalf5ass(mes $$9 million shares o(tstandin7Valuing the cash fows to capital under the pre-bid plan when interest tax shields are included in the cash fows1992 1993 1994 199 199! 199" 1998$&7" $551 $!%9 "$5" "%17 &75 5!9%9& %5! 59 5! 1& $59 0$1$7%" "$&9 "%" "711 &$7 "" 5%!1*% 1*% 1*% 1*% 1*% 1*% 1*%&*5! &*51 &* &*"9 &*" &*$9 &*$%b5cash .ows available for capital e6(al cash .ows available for capital payments pl(s cash interestc5disco(nt rate is comp(ted (sin7 the C3+8/ with an (nlevered asset beta of &*7&/ a ris90free rate of 9: and a ris9 premi(m of !:d5the c(m(lative disco(nt factor for each year is the present val(e of ;1 received at the end of the yeare5calc(lated as the present val(e in 19!! of a 7rowin7 perpet(ity of the 199! cash .ow available to capitalCost o# capital under the pre-bid plan using tax-ad$usted discount rates %&illions o# dollars'3ss(mptions6(ity beta [c] &*9! &*9! &*9 &*!9 &*! &*!cost of e6(ity [d] (in :) 1%*9 1%*5 1%*1 15*7 15*?3CC [in :] 1"*7 1"*! 1 1*1 1*"a5cost of debt is ass(med to be the ris9 free rate beca(se the beta of the debt is ass(med to be @ero* Ahe tax rate is ":b5 the mar9et val(e of e6(ity is ass(med to 7row at the cost of e6(ityc5 the levered e6(ity beta (beta0e)5>B,[beta0a]/ where > is the mar9et val(e of =r nabisco and beta0a is the (nlevered asset betad5cac(lated (sin7 the C3+8Cost o# capital under the pre-bid plan using tax-ad$usted discount rates %&illions o# dollars'1994 199 199! 199" 1998$5!$ 1!5 & & &$%9"9 "1&1% "5%9 &!5" %!1!$95$1 "$!7& "5%9 &!5" %!1!&*77 &*75 &*7 &*7 &*715*$ 15 1*% 1*% 1*%1*" 1* 1*% 1*% 1*%a5cost of debt is ass(med to be the ris9 free rate beca(se the beta of the debt is ass(med to be @ero* Ahe tax rate is ":c5 the levered e6(ity beta (beta0e)5>B,[beta0a]/ where > is the mar9et val(e of =r nabisco and beta0a is the (nlevered asset betaValuing the cash fows #or capital under the pre bid plan using tax ad$usted discount rates%&illions o# dollars except per share data'Cash Flows 1989 1990 1991Cash .ows available for capital payments 517 9! 1"993fter tax cash interest "! "7 57Cash .ows available for capitalC 9&1 1"!5 1!5%?3CC(d) 1"*7: 1"*!: 1*&:C(m(lative disco(nt factor &*!! &*77 &*%!+resent val(e 79$*!! 1&%%*5 1$%$*&!3s per sheet 1&7& 1$5!,al(ation-rowth in cash .ows after 199! &:+resent val(e of cash .ows/19!90199! 1$91&+resent val(e of terminal val(e(f) !$7"$11!"1ess2 3ss(med debt 5$&4et val(e 159794et val(e per share(7) %9*777$9"3ss(me $$9 million shares o(tstandin73ss(me a ": tax rate e6(als interest in >xhibit 5 times %%:Valuing the cash fows #or capital under the pre bid plan using tax ad$usted discount rates%&illions o# dollars except per share data'1992 1993 1994 199 199! 199" 1998$&7" $551 $!%9 "$5" "%17 &75 5!955 " "9$ "&$ $71 171 01$5$! $9!5 "$%1 "555 "!!7 $% 5751*1: 1*": 1*": 1*: 1*%: 1*%: 1*%:&*59 &*5$ &*5 &* &*"5 &*" &*$%191*5$ 155$*$ 1%7*5 1$$ 1"%&*5 1$7"*!15&$ 155$ 1!" 11$ 1"! 1$!5 1$&!$: :1$91& 1$91&95!% 11"95$$9% $"&5$& 5$&17$9$ 191&&75*51&917 !"*&%11Valuing the cash fows to capital under the &anage&nt group plan when interest tax sheilds are included in the cash fows%&n o# dollrs exceot per share data'Cash Flows 19!9 199&Cash .ows available for capital payments 1$&1! 59"3fter tax cash interest $79$ 1"5"Cash .ows available for capitalC 1!1& 19%?3CC(d) 1*%: 1*%:C(m(lative disco(nt factor &*!7 &*7%+resent val(e 1$!!*7 17!*9%3s per shee 1$9$" 1!$,al(ation-rowth in cash .ows after 199! &:+resent val(e of cash .ows/19!90199! $"9!$+resent val(e of terminal val(e(f) %$7"&&!1ess2 3ss(med debt 5$&4et val(e $5$&4et val(e per share(7) 11&*&%113ss(me $$9 million shares o(tstandin73ss(me a ": tax rate e6(als interest in >xhibit 5 times %%:Cash .ows available for capitalCe6(las Cash .ows available for capital payments pl(s cash interestValuing the cash fows to capital under the &anage&nt group plan when interest tax sheilds are included in the cash fows%&n o# dollrs exceot per share data'1991 199$ 199" 199 1995 199% 1997 199!919 1$!$ 159 19% $" $797 """$ "%%%1$!% 11!" 1&"7 !5& %$ "51 & &$$&5 $%5 $%"1 $79% $9%! "1! """$ "%%%1*%: 1*%: 1*%: 1*%: 1*%: 1*%: 1*%: 1*%:&*%% &*5! &*51 &* &*"9 &*" &*$9 &*$%155*" 1$9*7 1"1*!1 1$"&*$ 1157*5$ 1&7&*"$ 9%%*$! 95"*1%1%5 1$9 1""1 1$" 11" 1&5! 977 9"!$: :$"9!$ $"9!$77 !!5$"1$! "$!""5$& 5$&$%$$ $7%$911*515$! 1$&*%5&%%Cash .ows available for capitalCe6(las Cash .ows available for capital payments pl(s cash interestValuing the cash fows to capital under the &anage&nt group plan when interest tax sheilds are included in the cash fows%&n o# dollrs exceot per share data',-- Capital structure #or ./. -abisco under the &anage&ent group plan %&illions o# dollars'(an* debt3mo(nt 5 ; 15&&& #nterest rate 5 1$ :De7innin7 Dalance#nterest+aydown>ndin7 Dalance0ssu&ed 1ebt 3mo(nt 5 ;5$& #nterest )ate 5 11:De7innin7 Dalance#nterest+aydown>ndin7 Dalance2ubordinated 1ebt 3mo(nt 5 ;"&&& #nterest )ate 5 1:De7innin7 Dalance#nterest+aydown>ndin7 Dalance345 3re#erred 3mo(nt 5 ; 1"7" #nterest )ate 5 1!*!:De7innin7 Dalance+#E dividendsCash 'ividends+aydown>ndin7 DalanceCon+ertible 3mo(nt 5 ; 91% #nterest )ate 51" : (19!9)/ 1!*!: (199& 0 199!)De7innin7 Dalance+#E dividendsCash 'ividends+aydown>ndin7 Dalance,-- Capital structure #or ./. -abisco under the &anage&ent group plan %&illions o# dollars'1989 1990 1991 1992 1993 1994 199 199!15&&& $"9$ "&75 $!77 $11 1$17 & &1!&& "95 "%9 "5 $!9 15 & &117&! $1! 19! %% 119 1$17 & &"$9$ "&75 $!77 $11 1$17 & & &5$& !9 519 "79! $9!$ 1!5 & &57$ 5"! 97 1! "$! $& & &"1& "75 7$1 !1% && 1!5 & &!9 519 "79! $9!$ $5! & & &"&&& "&&& "&&& "&&& "&&& "&&& "&&& $51&$& $& $& $& $& $& $& "51& & & & & & & $51&"&&& "&&& "&&& "&&& "&&& "&&& "&&& &1"7" 1%"$ 19"! $"&" $7"% "$5& "!%1 !57$5! "&7 "% "" 51 %11 7$% !%$& & & & & & & && & & & & & & &1%"$ 19"! $"&" $7"% "$59 "!%1 5!7 51%$#nterest )ate 51" : (19!9)/ 1!*!: (199& 0 199!)91% 1&"5 1$$9 1%& 17"5 $&%1 $! $9&9119 195 $"1 $75 "$% "!7 %& 57& &&1&"5 1$$9 1%& 17"5 $&%1 $! $9&9 "55199" 1998& && && && && && && && && && && && &51%$ $!&197& 5$7& && &$!&1 &"55 1&5%5& 77$1&5,--! Cost o# capital under &anage&ent group plan using tax ad$usted discount rates %&illions o# dollars'0ssu&ptions Dan9 'ebtbeta &6(ity Deta (d)Cost of >6(ity (e)?3CC(f)(a) ndin7 Dalance0ssu&ed 1ebt 3mo(nt 5 ;5$& #nterest )ate 5 11:De7innin7 Dalance#nterest+aydown>ndin7 Dalance2ubordinated 1ebt 3mo(nt 5 ;"5&& #nterest )ate 5 1:De7innin7 Dalance#nterest+aydown>ndin7 Dalance345 3re#erred 3mo(nt 5 ; 1"7" #nterest )ate 5 15: (19!90199&)/ 17*$:(19910199$)De7innin7 Dalance+#E dividendsCash 'ividends+aydown>ndin7 DalanceCon+ertible 3mo(nt 5 ; $51! #nterest )ate 515 : (19!90199&)/ 1!*!: (1991 0 199!)De7innin7 Dalance+#E dividendsCash 'ividends+aydown>ndin7 Dalance,--9 capital structure #or ./. -abisco under 55.6s 7perating 3lan %&illions o# dollars'1989 1990 1991 1992 1993 1994 199 199!1$"!& !95! 5!1$ 5119 5195 $%1$ %$9 &1!% 1&75 %97 %1 5&" "1" 7% &"$$ "1% %9" 9$ 15!" 19!" %$9 &!95! 5!1$ 5119 195 $%1$ %$9 & &5$& !9 519 "79! $9!$ $5!$ $1!$ &57$ 5"! 97 1! "$! $! $& &"1& "75 7$1 !1% && && $1!$ &!9 519 "79! $9!$ $5!$ $1!$ & &"5&& "5&& "5&& "5&& "5&& "5&& "5&& "799& 9& 9& 9& 9& 9& 9& !7& & & & & & $1 """&"5&& "5&& "5&& "5&& "5&& "5&& "79 19#nterest )ate 5 15: (19!90199&)/ 17*$:(19910199$)1"7" 15!& 1!17 $1$9 & & & &$&% $"7 "1$ "%% & & & && & & & & & & && & & & & & & &15!& 1!17 $1$9 $95 & & & nterest )ate 515 : (19!90199&)/ 1!*!: (1991 0 199!)$51! $!9% """1 "95! 7&$ 55!% %%"% 7!!""7! "5 %$% 7 !! 1&5& 1$! 1!$& & & & & & & && & & & & & & &$!9% """1 "95! 7&$ 55!% %%"% 7!!" 9"%5199" 1998& && && && && && && && &19 &$1 &19 && && && && && && &9"%5 7"$&17%1 1"7%& &"!&% "197"$& "77Cost o# capital under 55.6s plan using the tax-ad$usted discount rates 8&illions o# dollars90ssu&ptions;uit) Val3er 2hare"1""7!$!" $1$&" 5$& 15999 7&$%!!$!175 "155& 5$& $%"%5 115"179%$! "&!" 5$& $5%"& 11$,--14 2elected 7perating Flows ?nder the three di:erent 3lans1989 19904nterest ,ax 2hields %interest @ tax rate'+re0bid strate7y 19! $$5EE)Hs Gtrate7y 9"% 79%8ana7ement -ro(pHs Gtarte7y 99 %&3lanned Capital >xpenditure+re0bid strate7y 17&! 1%$EE)Hs Gtrate7y 77 55%8ana7ement -ro(pHs Gtarte7y "$ "!1-et 3roceeds #ro& 0sste 2ales+re0bid strate7y & &EE)Hs Gtrate7y "5&& $7&&8ana7ement -ro(pHs Gtarte7y 1$%!& &0#ter-tax operating cash fows %operating proAts @ %1 - tax rates' B depriciation'+re0bid strate7y $7$& $99"EE)Hs Gtrate7y "&9 "1$18ana7ement -ro(pHs Gtarte7y $&$ $$994IA>2 'ata for prebid strate7y are from >xhibit 5J for the mana7ement 7ro(p strate7y fro >xhibit % and for EE)Hs strate7y from exhibit 7(a) terminal val(es are calc(lated as perpet(ities of the 199! val(e witho(t 7rowth (sin7 a 1*%: disco(nt rate(b) Calc(lated (sin7 a 1*%: disco(nt rate1991 1992 1993 1994 199 199! 199" 1998$"% $"5 $$ $ 15% 1"9 !! 07%79 %$ 9 "7 $7 1%% 7 &"7 &$ "5" $!9 $1$ 119 & &1"5 9"& 7"! 7"5 7"5 7"5 7"5 7"5555 57$ 5!% 59! %1! %"% %5! %7!"!& "!9 "9% &$ 1$ $$ "$ $& & & & & & & && & & & & & & && & & & & & &0#ter-tax operating cash fows %operating proAts @ %1 - tax rates' B depriciation'""5$ "%"$ $9$ $$! 5%& 9$5 5"$% 57%1"1 "%"9 "!95 1%$ 5" 771 51$& 55&1$5! $!91 "11! ""57 "%$1 "91& $$9 5!&4IA>2 'ata for prebid strate7y are from >xhibit 5J for the mana7ement 7ro(p strate7y fro >xhibit % and for EE)Hs strate7y from exhibit 7terminal val(es are calc(lated as perpet(ities of the 199! val(e witho(t 7rowth (sin7 a 1*%: disco(nt rate1998 ,er&inal Value %a' 3resent +alue%b'& 97&& $!&&& $1"&5&" %957% "%7"&$ $!"%& && 511&& 11&%"95! $9"!5"7%7! $9&9%"1"%7 $"1"