A

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48

PPG, FINANCIAL MODEL, 2001-2005

Profit and loss assumptions
Sales growth
COGS/Sales
SG&A/Sales
Depreciation/Gross fixed assets
Interest rate
Minority interest as % of PAT
Growth rate of total dividends
Tax rate

2001
11%

constant
18.28%
12.24%
3.21%
34.08%
constant
7.93%

Liabilities
Accounts Payable/Sales
Accrued Expense/Sales
Other Current Liabilities/Sales

8.50%
7.25%
constant

Debt/Assets
Deferred Taxes
Minority Interest
Other liabilities, annual growth
Treasury stock

32.00%
growth at sales growth
assumed constant
12.53%
plug

PROFIT AND LOSS

2003
-2%

2004
4%

61.39%
18.38%
6.31%
6.70%
4.32%
4.13%
36.28%

Balance sheet assumptions

Assets
Cash and short-term investments
Receivables/Sales
Inventories/Sales
Other Current Assets/Sales
Property, Plant, Equipment, Net/Sales
Investments and advances
Other Assets/Sales

Sales
Cost of Goods Sold
Selling, General, and Administrative
Expense
Operating Income Before Depreciation
Depreciation and Amortization
Interest Expense
Nonoperating Income (Expense) and
Special Items
Pretax Income
Income Taxes - Total
Minority Interest
Net Income
Dividend
Accrued

2002
8%

2000
8,629
5,334

2001
9,578
5,880

2002
10,344
6,351

2003
10,138
6,224

2004
10,543
6,472

1,646
1,649
447
193

1,761
1,937
472
204

1,902
2,092
522
216

1,863
2,051
562
222

1,938
2,133
601
226

8
1,017
369
28
620
276
344

8
1,253
455
20
779
287
491

8
1,346
488
21
837
299
537

8
1,258
456
20
782
312
470

8
1,298
471
20
806
324
482

A
49
50
51
52
53
54
55
56

ASSETS
Cash and Short-Term Investments
Receivables
Inventories - Total
Other Current Assets
Total Current Assets

Property, Plant, and Equipment, Gross

Depreciation, Depletion, and Amortization
57 (Accumulated)
58 Property, Plant, and Equipment, Net
59
60 Investments and Advances
61 Intangibles
62 Other Assets
63 TOTAL ASSETS
64
65 LIABILITIES
66 Accounts Payable
67 Accrued Expense
68 Other Current Liabilities
69
70 Debt
71 Deferred Taxes
72 Minority Interest
73 Other Liabilities
74
75 EQUITY
76 Common Stock
77 Capital Surplus
78 Retained Earnings
79 Less: Treasury Stock
80 Total stockholders equity
81 TOTAL LIABILITIES AND EQUITY
82
83
84 FREE CASH FLOW (FCF)
85 Profit after tax
86 Add back depreciation
87 Change in net working capital
88
Increase in operating current assets
89
Add increase in operating current liabilities
90 Subtract capital expenditures
91 Subtract increase in other assets
92 Add back after-tax interest
93 FCF
94
95
96 Valuing PPG
97 WACC

B
2000
111
1,563
1,121
298
3,093

C
2001
111
1,751
1,172
307
3,341

D
2002
111
1,891
1,266
332
3,600

E
2003
111
1,853
1,241
325
3,530

F
2004
111
1,927
1,290
338
3,667

7,089

7,885

8,668

9,159

9,898

4,148
2,941

4,620
3,265

5,142
3,526

5,704
3,455

6,305
3,593

320
1,700
1,071
9,125

320
1,700
1,156
9,782

320
1,700
1,248
10,393

320
1,700
1,347
10,352

320
1,700
1,454
10,734

764
606
12

2001
814
694
12

2002
879
750
12

2003
861
735
12

2004
896
764
12

2,971
543
128
1,004

3,130
603
128
1,130

3,326
651
128
1,271

3,313
638
128
1,431

3,435
663
128
1,610

484
102
6,019
3,508
3,097
9,125

484
102
6,510
3,825
3,271
9,782

484
102
7,048
4,257
3,377
10,393

484
102
7,518
4,869
3,235
10,352

484
102
8,000
5,360
3,226
10,734

2001
779
472

2002
837
522

2003
782
562

2004
806
601

-248
138
-796
-85
130
390

-258
121
-783
-92
138
484

70
-33
-492
-99
142
932

-137
64
-739
-107
144
633

2000

7.47%

98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128

A
Long-term free cash flow growth rate

Year
FCF
Terminal
Total
Discounted value
Add back initial cash
Firm value
Subtract total debt value, Dec.00
Implied equity value

4%
2001
390

2002
484

2003
932

2004
633

390

484

932

633

16,405 <-- =NPV(B97,C103:I103)*(1+B97)^0.5

111
16,516
4,646 <-- =SUM(B70:B73) -- this is controversial!
11,870

Number of shares outstanding, Dec.00

Implied value per share
Market price per share, Dec. 00
PPG over or under-valued?

168.22
70.56

46.31
undervalued <-- =IF(B112>B114*1.1,"undervalued",IF(B112<B114/1.1,"ove

=IF(B96>B97,B111,"nmf")

WACC -->

70.56
6%
7%
8%
9%
10%
11%
12%
13%
14%

DATA TABLE: SENSITIVITY OF PPG'S STOCK VALUA

TO WACC AND LONG-TERM GROWTH RATE
Long-term FCF growth
1%
3%
4%
5%
47.72
89.00
140.61
295.44
35.47
60.44
85.41
135.35
26.71
43.29
57.79
81.96
20.14
31.84
41.21
55.25
15.03
23.66
30.14
39.21
10.93
17.52
22.23
28.50
7.58
12.74
16.28
20.84
4.78
8.91
11.66
15.10
2.41
5.77
7.95
10.62

G
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36

2005
4%

2005
10,965
6,731

37
38
39
40

2,016
2,218
649
234

41
42
43
44
45
46
47
48

8
1,326
481
21
824
338
486

49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97

G
2005
111
2,004
1,342
352
3,809
10,691
6,954
3,737
320
1,700
1,569
11,135
2005
931
794
12
3,563
690
128
1,812

484
102
8,486
5,868
3,204
11,135

2005
824
649
-142
66
-793
-115
149
639

G
H
I
J
98
99
100
2005
101
639
102
19,167 <-- =G101*(1+B98)/(B97-B98)
103
19,806
104
105
106
107
108
109
110
111
112
113
114
dervalued",IF(B112<B114/1.1,"overvalued","ok"))
115
116
IVITY OF PPG'S STOCK VALUATION
LONG-TERM117
GROWTH RATE
118
119
6%
7%
120
nmf
nmf
121 285.17
nmf
122 130.30
275.33
123 78.65
125.46
124 52.81
75.47
125 37.28
50.46
126 26.93
35.44
127 19.52
25.41
128 13.95
18.24

A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48

PPG, FINANCIAL MODEL, 2001-2005

Profit and loss assumptions
Sales growth
COGS/Sales
SG&A/Sales
Depreciation/Gross fixed assets
Interest rate
Minority interest as % of PAT
Growth rate of total dividends
Tax rate

2001
11%

constant
18.28%
12.24%
3.21%
34.08%
constant
7.93%

Liabilities
Accounts Payable/Sales
Accrued Expense/Sales
Other Current Liabilities/Sales

8.50%
7.25%
constant

Debt/Assets
Deferred Taxes
Minority Interest
Other liabilities, annual growth
Treasury stock

32.00%
growth at sales growth
assumed constant
12.53%
plug

PROFIT AND LOSS

2003
-2%

2004
4%

61.39%
18.38%
6.31%
6.70%
4.32%
4.13%
36.28%

Balance sheet assumptions

Assets
Cash and short-term investments
Receivables/Sales
Inventories/Sales
Other Current Assets/Sales
Property, Plant, Equipment, Net/Sales
Investments and advances
Other Assets/Sales

Sales
Cost of Goods Sold
Selling, General, and Administrative
Expense
Operating Income Before Depreciation
Depreciation and Amortization
Interest Expense
Nonoperating Income (Expense) and
Special Items
Pretax Income
Income Taxes - Total
Minority Interest
Net Income
Dividend
Accrued

2002
8%

2000
8,629
5,334

2001
9,578
5,880

2002
10,344
6,351

2003
10,138
6,224

2004
10,543
6,472

1,646
1,649
447
193

1,761
1,937
472
204

1,902
2,092
522
216

1,863
2,051
562
222

1,938
2,133
601
226

8
1,017
369
28
620
276
344

8
1,253
455
20
779
287
491

8
1,346
488
21
837
299
537

8
1,258
456
20
782
312
470

8
1,298
471
20
806
324
482

A
49
50
51
52
53
54
55
56

ASSETS
Cash and Short-Term Investments
Receivables
Inventories - Total
Other Current Assets
Total Current Assets

Property, Plant, and Equipment, Gross

Depreciation, Depletion, and Amortization
57 (Accumulated)
58 Property, Plant, and Equipment, Net
59
60 Investments and Advances
61 Intangibles
62 Other Assets
63 TOTAL ASSETS
64
65 LIABILITIES
66 Accounts Payable
67 Accrued Expense
68 Other Current Liabilities
69
70 Debt
71 Deferred Taxes
72 Minority Interest
73 Other Liabilities
74
75 EQUITY
76 Common Stock
77 Capital Surplus
78 Retained Earnings
79 Less: Treasury Stock
80 Total stockholders equity
81 TOTAL LIABILITIES AND EQUITY
82
83
84 FREE CASH FLOW (FCF)
85 Profit after tax
86 Add back depreciation
87 Change in net working capital
88
Increase in operating current assets
89
Add increase in operating current liabilities
90 Subtract capital expenditures
91 Subtract increase in other assets
92 Add back after-tax interest
93 FCF
94
95
96 Valuing PPG
97 WACC

B
2000
111
1,563
1,121
298
3,093

C
2001
111
1,751
1,172
307
3,341

D
2002
111
1,891
1,266
332
3,600

E
2003
111
1,853
1,241
325
3,530

F
2004
111
1,927
1,290
338
3,667

7,089

7,885

8,668

9,159

9,898

4,148
2,941

4,620
3,265

5,142
3,526

5,704
3,455

6,305
3,593

320
1,700
1,071
9,125

320
1,700
1,156
9,782

320
1,700
1,248
10,393

320
1,700
1,347
10,352

320
1,700
1,454
10,734

764
606
12

2001
814
694
12

2002
879
750
12

2003
861
735
12

2004
896
764
12

2,971
543
128
1,004

3,130
603
128
1,130

3,326
651
128
1,271

3,313
638
128
1,431

3,435
663
128
1,610

484
102
6,019
3,508
3,097
9,125

484
102
6,510
3,825
3,271
9,782

484
102
7,048
4,257
3,377
10,393

484
102
7,518
4,869
3,235
10,352

484
102
8,000
5,360
3,226
10,734

2001
779
472

2002
837
522

2003
782
562

2004
806
601

-248
138
-796
-85
130
390

-258
121
-783
-92
138
484

70
-33
-492
-99
142
932

-137
64
-739
-107
144
633

2000

7.47%

98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125

A
Long-term free cash flow growth rate

Year
FCF
Terminal
Total
Discounted value
Add back initial cash
Firm value
Subtract total debt value, Dec.00
Implied equity value
Number of shares outstanding, Dec.00
Implied value per share
Market price per share, Dec. 00
PPG over or under-valued?

Data table: PPE/Sales and share value

PPE/Sales
34%
33%
32%
31%
30%
29%

4%
2001
390

2002
484

2003
932

2004
633

390

484

932

633

16,405 <-- =NPV(B97,C103:I103)*(1+B97)^0.5

111
16,516
4,646 <-- =SUM(B70:B73) -- this is controversial!
11,870
168.22
70.56

46.31
undervalued <-- =IF(B112>B114*1.1,"undervalued",IF(B112<B114/1.1,"ove

70.56 <-- =B112, data table header

70.72
72.67
74.62
76.57
78.52
80.47

G
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36

2005
4%

2005
10,965
6,731

37
38
39
40

2,016
2,218
649
234

41
42
43
44
45
46
47
48

8
1,326
481
21
824
338
486

49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97

G
2005
111
2,004
1,342
352
3,809
10,691
6,954
3,737
320
1,700
1,569
11,135
2005
931
794
12
3,563
690
128
1,812

484
102
8,486
5,868
3,204
11,135

2005
824
649
-142
66
-793
-115
149
639

G
H
I
J
98
99
100
2005
101
639
102
19,167 <-- =G101*(1+B98)/(B97-B98)
103
19,806
104
105
106
107
108
109
110
111
112
113
114
dervalued",IF(B112<B114/1.1,"overvalued","ok"))
115
116
117
118
119
120
121
122
123
124
125

A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48

PPG, FINANCIAL MODEL, 2001-2005

Profit and loss assumptions
Sales growth
COGS/Sales
SG&A/Sales
Depreciation/Gross fixed assets
Interest rate
Minority interest as % of PAT
Growth rate of total dividends
Tax rate

2001
11%

constant
18.28%
12.24%
3.21%
34.08%
constant
7.93%

Liabilities
Accounts Payable/Sales
Accrued Expense/Sales
Other Current Liabilities/Sales

8.50%
7.25%
constant

Debt/Assets
Deferred Taxes
Minority Interest
Other liabilities, annual growth
Treasury stock

32.00%
growth at sales growth
assumed constant
12.53%
plug

PROFIT AND LOSS

2003
-2%

2004
4%

61.39%
18.38%
6.31%
6.70%
4.32%
4.13%
36.28%

Balance sheet assumptions

Assets
Cash and short-term investments
Receivables/Sales
Inventories/Sales
Other Current Assets/Sales
Property, Plant, Equipment, Net/Sales
Investments and advances
Other Assets/Sales

Sales
Cost of Goods Sold
Selling, General, and Administrative
Expense
Operating Income Before Depreciation
Depreciation and Amortization
Interest Expense
Nonoperating Income (Expense) and
Special Items
Pretax Income
Income Taxes - Total
Minority Interest
Net Income
Dividend
Accrued

2002
8%

2000
8,629
5,334

2001
9,578
5,880

2002
10,344
6,351

2003
10,138
6,224

2004
10,543
6,472

1,646
1,649
447
193

1,761
1,937
472
204

1,902
2,092
522
216

1,863
2,051
562
222

1,938
2,133
601
226

8
1,017
369
28
620
276
344

8
1,253
455
20
779
287
491

8
1,346
488
21
837
299
537

8
1,258
456
20
782
312
470

8
1,298
471
20
806
324
482

A
49
50
51
52
53
54
55
56

ASSETS
Cash and Short-Term Investments
Receivables
Inventories - Total
Other Current Assets
Total Current Assets

Property, Plant, and Equipment, Gross

Depreciation, Depletion, and Amortization
57 (Accumulated)
58 Property, Plant, and Equipment, Net
59
60 Investments and Advances
61 Intangibles
62 Other Assets
63 TOTAL ASSETS
64
65 LIABILITIES
66 Accounts Payable
67 Accrued Expense
68 Other Current Liabilities
69
70 Debt
71 Deferred Taxes
72 Minority Interest
73 Other Liabilities
74
75 EQUITY
76 Common Stock
77 Capital Surplus
78 Retained Earnings
79 Less: Treasury Stock
80 Total stockholders equity
81 TOTAL LIABILITIES AND EQUITY
82
83
84 FREE CASH FLOW (FCF)
85 Profit after tax
86 Add back depreciation
87 Change in net working capital
88
Increase in operating current assets
89
Add increase in operating current liabilities
90 Subtract capital expenditures
91 Subtract increase in other assets
92 Add back after-tax interest
93 FCF
94
95
96 Valuing PPG
97 WACC

B
2000
111
1,563
1,121
298
3,093

C
2001
111
1,751
1,172
307
3,341

D
2002
111
1,891
1,266
332
3,600

E
2003
111
1,853
1,241
325
3,530

F
2004
111
1,927
1,290
338
3,667

7,089

7,885

8,668

9,159

9,898

4,148
2,941

4,620
3,265

5,142
3,526

5,704
3,455

6,305
3,593

320
1,700
1,071
9,125

320
1,700
1,156
9,782

320
1,700
1,248
10,393

320
1,700
1,347
10,352

320
1,700
1,454
10,734

764
606
12

2001
814
694
12

2002
879
750
12

2003
861
735
12

2004
896
764
12

2,971
543
128
1,004

3,130
603
128
1,130

3,326
651
128
1,271

3,313
638
128
1,431

3,435
663
128
1,610

484
102
6,019
3,508
3,097
9,125

484
102
6,510
3,825
3,271
9,782

484
102
7,048
4,257
3,377
10,393

484
102
7,518
4,869
3,235
10,352

484
102
8,000
5,360
3,226
10,734

2001
779
472

2002
837
522

2003
782
562

2004
806
601

-248
138
-796
-85
130
390

-258
121
-783
-92
138
484

70
-33
-492
-99
142
932

-137
64
-739
-107
144
633

2000

7.47%

98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115

A
Terminal value equity multiple

Year
FCF
Terminal
Total
Discounted value
Add back initial cash
Firm value
Subtract total debt value, Dec.00
Implied equity value
Number of shares outstanding, Dec.00
Implied value per share
Market price per share, Dec. 00
PPG over or under-valued?

13
2001
390

2002
484

2003
932

2004
633

390

484

932

633

14,772 <-- =NPV(B97,C103:I103)*(1+B97)^0.5

111
14,883
4,646 <-- =SUM(B70:B73) -- this is controversial!
10,237
168.22
60.85

46.31
undervalued <-- =IF(B112>B114*1.1,"undervalued",IF(B112<B114/1.1,"ove

G
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36

2005
4%

2005
10,965
6,731

37
38
39
40

2,016
2,218
649
234

41
42
43
44
45
46
47
48

8
1,326
481
21
824
338
486

49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97

G
2005
111
2,004
1,342
352
3,809
10,691
6,954
3,737
320
1,700
1,569
11,135
2005
931
794
12
3,563
690
128
1,812

484
102
8,486
5,868
3,204
11,135

2005
824
649
-142
66
-793
-115
149
639

G
H
I
J
98
99
100
2005
101
639
102
16,909 <-- =G45*B98+SUM(G70:G73)
103
17,547
104
105
106
107
108
109
110
111
112
113
114
dervalued",IF(B112<B114/1.1,"overvalued","ok"))
115