rjr nabisco valuation

Valuing the cash flows to capital under the pre-bid plan when interest tax shields are included in the cash flows

(millions of dollars except per share data)1989 1990 1991 1992 1993

Cash Flows

Cash Flows available for capital payments [a] 517 948 1399 2073 2551

Cash Interest [a] 582 662 693 690 658

Cash Flows available for capital [b] 1099 1610 2092 2763 3209

Discount Rate [c] 14.6 14.6 14.6 14.6 14.6

Cumulative discount factor [d] 0.87 0.76 0.66 0.58 0.51

Present Value

Valuation

Growth in cash flows after 1998 0 2 4

Present value of cash flows, 1989-98 13553 13553 13553

Present Value of terminal value [e] 8008 9279 11030

Less: Assumed Debt 21561 22832 24583

Net Value 16357 17628 19379

Net Value per share [f] 71 77 85

a=case exhibit 5b=cash flows available for capital equal cash flows available for capital payments plus cash interestc=discount rate is computed using the CAPM, with an unlevered asset beta of 0.70, a risk-free rate of 9% and a risk premium of 8%d=the cumulative discount factor for each year is the present value of $1 received at the end of the yeare=calculated as the present value in 1988 of a growing perpetuity of the 1998 cash flow available to capitalf=assumes 229 million shares outstanding

Valuing the cash flows to capital under the pre-bid plan when interest tax shields are included in the cash flows

1994 1995 1996 1997 1998

2869 3253 3617 4075 4589

594 458 410 259 -21

3463 3711 4027 4334 4568

14.6 14.6 14.6 14.6 14.6

0.44 0.39 0.34 0.29 0.26

c=discount rate is computed using the CAPM, with an unlevered asset beta of 0.70, a risk-free rate of 9% and a risk premium of 8%

e=calculated as the present value in 1988 of a growing perpetuity of the 1998 cash flow available to capital

Cost of capital under the pre-bid plan using tax-adjusted discount rates (millions of dollars)

AssumptionsUnlevered asset beta = 0.70Assumed debt beta = 0Risk free rate = 9%after tax expected return [a]=5.9%risk premium = 8%

Beginning of year book values 1989 1990 1991 1992 1993 1994 1995Assumed debt 5204 4894 4519 3798 3982 2582 1854Market Value of equity [b] 12790 14949 17405 20199 23361 26939 31016value of rjr nabisco 17994 19843 21924 23997 26343 29521 32870

Equity beta [c] 0.98 0.98 0.94 0.89 0.84 0.8 0.77 0.75cost of equity [d] (in %) 16.9 16.5 16.1 15.7 15.4 15.2 15WACC [in %] 13.7 13.8 14 14.1 14.3 14.3 14.4

a=cost of debt is assumed to be the risk free rate because the beta of the debt is assumed to be zero. The tax rate is 34%b= the market value of equity is assumed to grow at the cost of equityc= the levered equity beta (beta-e)=E/V[beta-a], where E is the market value of jr nabisco and beta-a is the unlevered asset betad=caculated using the CAPM

1996 1997 19980 0 0

35649 40853 4681835649 40853 46818

0.7 0.7 0.714.6 14.6 14.614.6 14.6 14.6

a=cost of debt is assumed to be the risk free rate because the beta of the debt is assumed to be zero. The tax rate is 34%

c= the levered equity beta (beta-e)=E/V[beta-a], where E is the market 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 rates(millions of dollars except per share data)Cash Flows 1989 1990 1991 1992 1993Cash flows available for capital payments 517 948 1399 2073 2551After tax cash interest 384 437 457 455 434Cash flows available for capital© 901 1385 1856 2528 2985WACC(d) 13.7% 13.8% 14.0% 14.1% 14.3%Cumulative discount factor 0.88 0.77 0.68 0.59 0.52Present value 792.88 1066.45 1262.08 1491.52 1552.2

As per sheet 1070 1258 1502 1552ValuationGrowth in cash flows after 1998 0% 2%Present value of cash flows,1989-1998 12910 12910Present value of terminal value(f) 8273 9586

21183 22496Less: Assumed debt 5204 5204Net value 15979 17292Net value per share(g) 69.77729 75.51092

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

Valuing the cash flows for capital under the pre bid plan using tax adjusted discount rates(millions of dollars except per share data)1994 1995 1996 1997 19982869 3253 3617 4075 4589

392 302 271 171 -143261 3555 3887 4246 4575

14.3% 14.4% 14.6% 14.6% 14.6%0.45 0.4 0.35 0.3 0.26

1467.45 1422 1360.45 1273.81483 1412 1348 1285 1208

4%1291011395

243045204

1910083.40611

Valuing the cash flows to capital under the managemnt group plan when interest tax sheilds are included in the cash flows(mn of dollrs exceot per share data)

Cash Flows 1989 1990 1991 1992Cash flows available for capital payments 12018 593 919 1282After tax cash interest 2792 1353 1286 1183Cash flows available for capital© 14810 1946 2205 2465WACC(d) 14.6% 14.6% 14.6% 14.6%Cumulative discount factor 0.87 0.76 0.66 0.58Present value 12884.7 1478.96 1455.3 1429.7

As per she 12923 1482 1465 1429ValuationGrowth in cash flows after 1998 0% 2%Present value of cash flows,1989-1998 23982 23982Present value of terminal value(f) 6427 7447


Assume 229 million shares outstandingAssume 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 interest

Valuing the cash flows to capital under the managemnt group plan when interest tax sheilds are included in the cash flows(mn of dollrs exceot per share data)

1993 1994 1995 1996 1997 19981594 1946 2344 2797 3332 36661037 850 624 351 0 02631 2796 2968 3148 3332 3666

14.6% 14.6% 14.6% 14.6% 14.6% 14.6%0.51 0.44 0.39 0.34 0.29 0.26

1341.81 1230.24 1157.52 1070.32 966.28 953.161331 1234 1143 1058 977 938

4%23982

8852

328335204

27629120.6507

TN-5 Capital structure for RJR Nabisco under the management group plan (millions of dollars)1989 1990

Bank debt Amount = $ 15000 Interest rate = 12 %

Beginning Balance 15000 2392Interest 1800 395Paydown 11708 218Ending Balance 3292 3075

Assumed Debt Amount = $5204 Interest Rate = 11%


Subordinated Debt Amount = $3000 Interest Rate = 14%


PIK Preferred Amount = $ 1373 Interest Rate = 18.8%

Beginning Balance 1373 1632PIK dividends 258 307Cash Dividends 0 0Paydown 0 0Ending Balance 1632 1938

Convertible Amount = $ 916 Interest Rate = 13 % (1989), 18.8% (1990 - 1998)

Beginning Balance 916 1035PIK dividends 119 195Cash Dividends 0 0Paydown 0Ending Balance 1035 1229

1991 1992 1993 1994 1995 1996 1997 1998

3075 2877 2411 1217 0 0 0 0369 345 289 145 0 0 0 0198 466 1194 1217 0 0 0 0

2877 2411 1217 0 0 0 0 0

4519 3798 2982 1854 0 0 0 0497 418 328 204 0 0 0 0721 816 400 1854 0 0 0 0

3798 2982 2584 0 0 0 0 0

3000 3000 3000 3000 3000 2510 0 0420 420 420 420 420 351 0 0

0 0 0 0 0 2510 0 03000 3000 3000 3000 3000 0 0 0

1938 2303 2736 3250 3861 4857 5162 2801364 433 514 611 726 862 970 527

0 0 0 0 0 0 0 00 0 0 0 0 0 0 0

2303 2736 3259 3861 4587 5162 2801 0

Interest Rate = 13 % (1989), 18.8% (1990 - 1998)

1229 1460 1735 2061 2448 2909 3455 4105231 275 326 387 460 547 650 772

1460 1735 2061 2448 2909 3455 4105

TN-6 Cost of capital under management group plan using tax adjusted discount rates (millions of dollars)Assumptions Bank Debt Subordinate Debt:

beta 0 beta 0.25Unlevered asset Beta 0.7 after tax ra 0.06 after tax ra 0.07Risk free rate 9%risk premium 8%

Assumed debt: preferred stockbeta 0 beta 0.25after tax ra 0.06 interest ra 0.07

1989Beginning of year book values (b)

Assumed debt 5204bank debt 15000sunordinated debt 3000

preferred stock 1373convertible preferred 916

market value of equity © 2500

value of RJR Nabisco 27993

Equity Beta (d) 7.3

Cost of Equity (e) 67.50%

WACC(f) 11.70%

(a) Using a 34% tax rate, after tax debt rates are calculated as 66% of the CAPM determined rate based on the assumed beta. Preferred stock expected returns are also calculated using the CAPM(b) Exhibit TN-5c Value at the beginning of the year. Assumes that the market value of equity begins at the management groups equity investment of $2.5 billion and grows at the cosqt of equity

(d) The equity beta with positive subordinated debt and preferred stock betas is

TN-6 Cost of capital under management group plan using tax adjusted discount rates (millions of dollars)

1990 1991 1992 1993 1994 1995 1996 1997 1998

4894 4519 3798 2982 2852 1854 0 0 03292 3075 2877 2411 1217 0 0 0 03000 3000 3000 3000 3000 3000 2510

1632 1938 2303 2736 3250 3861 4587 5162 28011035 1229 1460 1735 23061 2448 2909 3455 4105

4187 5461 6905 5830 10347 12369 14614 17108 19916

18039 19222 20343 21394 22457 23532 24620 25725 26822

2.7 2.2 1.8 1.5 1.3 1.1 1 0.9 0.9

30.40% 26.50% 23.50% 21.30% 19.50% 18.10% 17.10% 16.40% 15.80%

12.00% 12.20% 12.40% 12.50% 12.70% 12.90% 13.10% 13.30% 13.60%

Using a 34% tax rate, after tax debt rates are calculated as 66% of the CAPM determined rate based on the assumed beta. Preferred stock expected returns are also calculated using the CAPM

Value at the beginning of the year. Assumes that the market value of equity begins at the management groups equity investment of $2.5 billion and grows at the cosqt of equity

The equity beta with positive subordinated debt and preferred stock betas is

Using a 34% tax rate, after tax debt rates are calculated as 66% of the CAPM determined rate based on the assumed beta. Preferred stock expected returns are also calculated using the CAPM

Value at the beginning of the year. Assumes that the market value of equity begins at the management groups equity 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 discount rates are included in the cash flows(mn of dollrs exceot per share data)

Cash Flows 1989 1990 1991 1992 1993Cash flows available for capital payments 12018 593 919 1282 1594After tax cash interest 1843 893 849 781 685Cash flows available for capital© 13861 1486 1768 2063 2279WACC(d) 11.7% 12.0% 12.2% 12.4% 12.5%Cumulative discount factor 0.9 0.8 0.71 0.63 0.56Present value 12474.9 1188.8 1255.28 1299.69 1276.24

As per she 12411 1187 1259 1308 1284ValuationGrowth in cash flows after 1998 0% 2%Present value of cash flows,1989-1998 23375 23375Present value of terminal value(f) 8175 9580


Assume 229 million shares outstandingAssume 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 interest

Valuing the cash flows to capital under the managemnt group plan when tax adjusted discount rates are included in the cash flows(mn of dollrs exceot per share data)

1994 1995 1996 1997 19981946 2344 2797 3332 3666

561 412 232 0 02507 2756 3029 3332 3666

12.7% 12.9% 13.1% 13.3% 13.6%0.5 0.44 0.39 0.35 0.3

1253.5 1212.64 1181.31 1166.2 1099.81253 1220 1187 1151 1115

4%2337511568

349435204

29739129.8646

Valuing the cash flows to capital under the KKR's plan when interest tax sheilds are included in the cash flows(mn of dollrs exceot per share data)

Cash Flows 1989 1990 1991 1992 1993 1994 1995 1996Cash flows available 3732 3521 1414 1740 1983 2383 2832 3330After tax cash interes 2548 2103 1685 1522 1321 1088 806 487Cash flows available f 6280 5624 3099 3262 3304 3189 3319 3351WACC(d) 14.6% 14.6% 14.6% 14.6% 14.6% 14.6% 14.6% 14.6%Cumulative discount f 0.87 0.76 0.66 0.58 0.51 0.44 0.39 0.34Present value 5463.6 4274.24 2045.34 1891.96 1685.04 1403.16 1294.41 1139.34

As per she 5480 4283 2059 1891 1672 1532 1401 1283ValuationGrowth in cash flows after 1998 0% 2% 4%Present value of cash flows,198 21872 21872 21872Present value of terminal value(f 7572 8774 10429

29444 30646 32301Less: Assumed debt 5204 5204 5204Net value 24240 25442 27097Net value per share(g) 105.8515 111.1004 118.3275

Discount rate is computed using the CAPM model with an unlevered asset beta of 0.7 a risk free rate of 9% and risk premium of 8%Assume 229 million shares outstandingAssume 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 interest

Valuing the cash flows to capital under the KKR's plan when interest tax sheilds are included in the cash flows(mn of dollrs exceot per share data)

1997 19983956 4319

21 03977 4319

14.6% 14.6%0.29 0.26

1153.33 1122.941166 1106

Discount rate is computed using the CAPM model with an unlevered asset beta of 0.7 a risk free rate of 9% and risk premium of 8%

TN-9 capital structure for RJR Nabisco under KKR's Operating Plan (millions of dollars)1989 1990

Bank debt Amount = $ 12380 Interest rate = 12 %


Assumed Debt Amount = $5204 Interest Rate = 11%


Subordinated Debt Amount = $3500 Interest Rate = 14%


PIK Preferred Amount = $ 1373 Interest Rate = 15% (1989-1990), 17.2%(1991-1992)


Convertible Amount = $ 2518 Interest Rate = 15 % (1989-1990), 18.8% (1991 - 1998)


1991 1992 1993 1994 1995 1996 1997 1998

5812 5119 5195 2612 629 0 0 0697 614 503 313 76 0 0 0693 924 1583 1983 629 0 0 0

5119 4195 2612 629 0 0 0 0

4519 3798 2982 2582 2182 0 0 0497 418 328 284 240 0 0 0721 816 400 400 2182 0 0 0

3798 2982 2582 2182 0 0 0 0

3500 3500 3500 3500 3500 3479 149 0490 490 490 490 490 487 21 0

0 0 0 0 21 3330 149 03500 3500 3500 3500 3479 149 0 0

Interest Rate = 15% (1989-1990), 17.2%(1991-1992)

1817 2129 0 0 0 0 0 0312 366 0 0 0 0 0 0

0 0 0 0 0 0 0 00 0 0 0 0 0 0 0

2129 2495 0 0 0 0 0 0

Interest Rate = 15 % (1989-1990), 18.8% (1991 - 1998)

3331 3958 4702 5586 6636 7883 9365 7320626 744 884 1050 1248 1482 1761 1376

0 0 0 0 0 0 0 00 0 0 0 0 0 3806 4319

3958 4702 5586 6636 7883 9365 7320 4377

Cost of capital under KKR's plan using the tax-adjusted discount rates [millions of dollars]

Assumptions

Unlevered beta = 0.70Risk free rate = 9%Risk premium =8%

Beginning of year book values [b] 1989 1990

Assumed debt 5204 4894Bank debt 12380 8958senior subordinated debt 3500 3500subordinated debt 0 0converting debt 1373 1580preferred stock 2518 2896market value of equity [c] 1500 2970value of rjr nabisco 26475 24798equity beta [d] 11.1 5.2cost of equity [e] 98 50.4wacc [f] 11.5 11.7

a=using a 34% tax rate, after tax debt rates are calculated as 66% of the CAPM determined rate based on the assumption beta. Preferred stock expected returns are also calculated using the CAPM.b= exhibit 9c=value at the beginning of the year. Assumes that the market value of equity begins at KKR's equity investment of $2.5 billion and grows at the cost of equity. Convertible debt becomes equity in 1992.

Bank debt Sub-ordinated debt converting debt assumed debt preferred stockBeta 0 0.25 0.25 0 0.25After tax rate [a] 0.06 0.07 0.07 0.06 0.07

1991 1992 1993 1994 1995 1996

4519 3798 2982 2582 2182 05812 5119 4195 2612 629 03500 3500 3500 3500 3500 3479

0 0 0 0 0 01817 2129 0 0 0 03331 3958 4792 5586 6636 78834466 6008 10469 12695 15167 17903

23446 24512 26848 26975 28114 292663.2 2.5 1.5 1.3 1.1 1

34.5 28.7 21.3 19.5 18 16.911.9 12 12.6 12.8 12.9 13.1

a=using a 34% tax rate, after tax debt rates are calculated as 66% of the CAPM determined rate based on the assumption beta. Preferred stock expected returns are also calculated using the CAPM.

c=value at the beginning of the year. Assumes that the market value of equity begins at KKR's equity investment of $2.5 billion and grows at the cost of equity. Convertible debt becomes equity in 1992.

1997 1998

0 00 0

149 00 00 0

9365 732020926 2432430441 31644

0.9 0.816.2 15.713.4 13.7

Valuing the cash flows to capital under the KKR's plan using tax adjusted discount rates (mn of dollrs exceot per share data)

Cash Flows 1989 1990 1991 1992 1993 1994Cash flows available for capital payments 3732 3521 1414 1740 1983 2383After tax cash interest 1682 1388 1112 1005 872 718Cash flows available for capital© 5414 4909 2526 2745 2855 2915WACC(d) 11.5% 11.7% 11.9% 12.0% 12.6% 12.8%Cumulative discount factor 0.9 0.8 0.72 0.64 0.57 0.5Present value 4872.6 3927.2 1818.72 1756.8 1627.35 1457.5

As per she 4854 3941 1813 1758 1625 1565ValuationGrowth in cash flows after 1998 0% 2% 4%Present value of cash flows,1989-1998 21206 21206 21206Present value of terminal value(f) 9628 11268 13583

30834 32474 34789Less: Assumed debt 5204 5204 5204Net value 25630 27270 29585Net value per share(g) 111.9214 119.083 129.1921

Discount rate is computed using the CAPM model with an unlevered asset beta of 0.7 a risk free rate of 9% and risk premium of 8%Assume 229 million shares outstandingAssume 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 interest

Valuing the cash flows to capital under the KKR's plan using tax adjusted discount rates (mn of dollrs exceot per share data)

1995 1996 1997 19982832 3330 3956 4319

532 321 14 03153 3344 3970 4319

12.9% 13.1% 13.4% 13.7%0.45 0.39 0.35 0.31

1418.85 1304.16 1389.5 1338.891503 1442 1382 1322

Discount rate is computed using the CAPM model with an unlevered asset beta of 0.7 a risk free rate of 9% and risk premium of 8%

1989 1990 1991Discount rate [a] 14.6 14.6 14.6cumulative discount factor [b] 0.87 0.76 0.66

Cash flows for available for capital payments[h] [exh.5] 517 948 1399Cash interest [exh.5] 582 662 693Cash flows available for capital [h] 1099 1610 2092present value 959 1225 1390



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)

Valuing the cash flows to capital under the pre-bid plan [interest tax shields in cash flows]

Valuing the cash flows to capital under the management group plan [interest tax shields in cash flows]

Valuing the cash flows to capital under KKR's plan [interest tax shields in cash flows]

1992 1993 1994 1995 1996 1997 1998 Terminal Value [c] Total [d]14.6 14.6 14.6 14.6 14.6 14.6 14.60.58 0.51 0.44 0.39 0.34 0.29 0.26

2073 2551 2869 3253 3617 4075 4589690 658 594 458 410 259 -21

2763 3209 3463 3711 4027 4334 4568 312881602 1624 1529 1429 1354 1271 1169 8008 21561

1282 1594 1946 2344 2797 3332 36661183 10387 850 624 351 0 02465 2631 2796 2967 3149 3332 3666 251091429 1331 1234 1143 1058 997 938 6427 30408

1740 1983 2383 2832 3330 3956 43191522 1321 1088 806 487 21 03262 3304 3471 3637 3817 3977 4319 295841891 1672 1532 1401 1283 1166 1106 7572 29444

less debt [e] equity value [f] per share [g]

5204 16357 71

5204 25204 110

5204 24240 106

TN-13 Summary of values of the three different RJR Nabisco plans using after tax adjusted discount rates (millions of dollars except pe share data)1989 1990 1991 1992

Valuing the cash flows to capital under the prebid plan (interest tax shield in WACC)Cash Flows Available for 517 948 1399 2073

Capital Payments (f) 384 437 457 455After tax cash interestCash Flows Available for 901 1385 1856 2528

CapitalWACC 13.70% 13.80% 13.90% 14.10%Cumulative WACC 0.88 0.77 0.68 0.59Present Value 793 1070 1259 1502

Valuing the cash flows to capital under the management group plan (interest tax shields in WACC)Cash Flows Available for

Capital Payments 12018 593 919 1282After tax cash interest 1843 893 849 781Cash Flows Available for

Capital 13861 1486 1768 2063WACC 11.70% 12.00% 12.20% 12.40%Cumulative WACC 0.9 0.8 0.71 0.63Present Value 12411 1187 1259 1308

Valuing the cash flows to capital under the KKR's plan (interest tax shields in WACC)Cash Flows Available for

Capital Payments 3732 3521 1414 1740After tax cash interest 1682 1388 1112 1005Cash Flows Available for

Capital 5414 4909 2526 2745WACC 11.50% 11.70% 11.90% 12.00%Cumulative WACC 0.9 0.8 0.72 0.64Present Value 4854 3941 1813 1758

a calculated as a perpetuity of the 1998 cash flowsb present cdef

TN-13 Summary of values of the three different RJR Nabisco plans using after tax adjusted discount rates (millions of dollars except pe share data) a b c d1993 1994 1995 1996 1997 1998 Terminal VTotal Less Debt Equity Val

2551 2869 3253 3671 4075 4589434 392 302 271 171 -14

2985 3261 3555 3942 4246 4575 31337

14.20% 14.30% 14.40% 14.60% 14.60% 14.60%0.52 0.46 0.4 0.35 0.3 0.26

1553 1484 1414 1349 1286 1209 8283 21203 5204 15999

1594 1946 1344 2797 3332 3666685 561 412 232 0 0

2279 2507 1756 3029 3332 3666 2688212.50% 12.70% 12.90% 13.10% 13.30% 13.60%

0.56 0.5 0.44 0.39 0.35 0.31284 1253 1220 1187 1151 1115 8175 31550 5204 263465

1983 2383 2832 3330 3956 4319872 718 532 321 14 0

2855 3101 3364 3651 3970 4319 3144712.60% 12.80% 12.90% 13.10% 13.40% 13.70%

0.57 0.5 0.45 0.39 0.35 0.311625 1565 1503 1442 1382 1322 9628 30834 5204 25630

ePer Share

70

115

112

TN-14 Selected Operating Flows Under the three different Plans

1989 1990 1991 1992Interest Tax Shields (interest * tax rate)Pre-bid strategy 198 225 236 235KKR's Strategy 936 796 679 642Management Group's Startegy 949 460 437 402

Planned Capital ExpenditurePre-bid strategy 1708 1462 1345 930KKR's Strategy 774 556 555 572Management Group's Startegy 432 381 380 389

Net Proceeds from Asste SalesPre-bid strategy 0 0 0 0KKR's Strategy 3500 2700 0 0Management Group's Startegy 12680 0 0 0

After-tax operating cash flows (operating profits * (1 - tax rates) + depriciation)Pre-bid strategy 2720 2993 3352 3632KKR's Strategy 3049 3121 3414 3639Management Group's Startegy 2042 2299 2584 2891

NOTE: Data for prebid strategy are from Exhibit 5; for the management group strategy fro Exhibit 6 and for KKR's strategy from exhibit 7(a) terminal values are calculated as perpetuities of the 1998 value without growth using a 14.6% discount rate(b) Calculated using a 14.6% discount rate

1993 1994 1995 1996 1997 1998 1998 Terminal Value (a)

224 2 156 139 88 -7 0449 37 274 166 7 0 0353 289 212 119 0 0 0

738 735 735 735 735 735 5034586 598 618 636 658 678 4644396 402 412 422 432 442 3024

0 0 0 0 0 0 00 0 0 0 0 0 00 0 0 0 0 0

2924 4228 4560 4925 5326 5761 394583895 4162 4453 4771 5120 5501 376783118 3357 3621 3910 4229 4580 31367

NOTE: Data for prebid strategy are from Exhibit 5; for the management group strategy fro Exhibit 6 and for KKR's strategy from exhibit 7terminal values are calculated as perpetuities of the 1998 value without growth using a 14.6% discount rate

Present value(b)

97028002130

695743672836

05110

11064

293852909623134

rjr nabisco valuation

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