Integrated Company Analysis

Deere & Company

December 14, 2009

Team A9 Eric Dolan

Adam Plunkett

Nina Rozell

Tom Schar

Kan Zuo

On our honor, we have neither given nor received unauthorized aid in completing this academic work.

Table of Contents
1. 2. EXECUTIVE SUMMARY................................................................................................................. 3 COMPANY & INDUSTRY PROFILE ............................................................................................. 3 2.1. Nothing Runs Like A Deere.......................................................................................................... 3 2.2. Company Overview ...................................................................................................................... 4 2.3. Competitive Landscape ................................................................................................................. 5 3. STRATEGIC RECOMMENDATIONS ........................................................................................... 6 4. FINANCIAL RECOMMENDATION ANALYSIS ......................................................................... 6 5. CHANNEL & MARKET STRATEGY ............................................................................................ 7 5.1. Brand Reputation .......................................................................................................................... 7 5.2. Target Market Segmentation......................................................................................................... 7 5.3. Channel Strategy & Product Mix .................................................................................................. 8 6. GLOBAL EXPANSION ..................................................................................................................... 9 6.1. Expansion in Brazil ..................................................................................................................... 10 7. WIND ENERGY ............................................................................................................................... 11 8. EXHIBITS & DETAILED ANALYSIS .......................................................................................... 13

1. EXECUTIVE SUMMARY
Analysis of John Deeres financial position and marketing strategies indicates the state of the organization is strong. Furthermore, key opportunities exist to accelerate future growth on both

immediate and long-term horizons through investment in new projects that will create incremental value for the organization. In the immediate-term, John Deere must protect the brands reputation by

addressing potential performance issues in the retail product line. Global operations are also a critical part of John Deeres growth strategy. Opportunities in Brazil present the most attractive option for increased production and sales. Over the long-term, investment in renewable resources, such as wind farms, will help John Deere strengthen its partnership with farmers. These initiatives will not only help John Deere increase shareholders value, but also maximize the profits its customers harvest from the land.

2. COMPANY & INDUSTRY PROFILE

2.1. Nothing Runs Like A Deere
Since 1837, the John Deere brand has been an iconic American symbol of quality and value. Unlike many American corporations, John Deeres success is measured in generations, rather than years or quarters. Tied to the crafts of agriculture and construction and guided by a genuine partnership with those who profit from the land, John Deere has defined its industry through continued innovation and service. Now, after a 170-year race to become the worlds leading manufacturer of heavy machinery for farmers and contractors, John Deere is getting a second wind. Refocused after a strategic shift in corporate direction in 2001, John Deere has set out on a new path to significantly increase the value it provides to its shareholders. Within the agricultural and construction machinery category, John Deere comfortably held a top spot in the minds of customers by consistently producing high-quality products and intently handling service issues. However, the organization suffered from the seasonal ebbs and flows inherent in the agricultural sectorits most profitable and largest division [Exhibit 1]. In addition to the pressures of a seasonal business, the organizations internal operations were nearly vertical. Inefficient teamwork and communication processes plagued the organization and isolated the value of best practices within the operational and manufacturing silos.

Since 2001, John Deere has worked to streamline the organization, rallying around ultimate performance yardstick: Shareholder Value Added (SVA) [Exhibit 2]. John Deeres renewed focus on SVA has improved the efficiency and profitability of the organization by striving to achieve: 1. Exceptional operating performance 2. Disciplined SVA growth 3. Aligned, high-performance teamwork By measuring success across the organization in terms of these three objectives, John Deere has rewarded shareholders with consistently strong performance across the business cycle and through the economic downturn.

2.2. Company Overview

John Deere organizes its operations into three core categories: Agriculture & Turf, Construction & Forestry, and John Deere Credit [Exhibit 3]. Accounting for 79% of total revenues, Agricultural and Turf equipment makes up the majority of John Deeres operations. As of their October 31st fiscal year end, revenue was down 18.7% with gross profit and earnings-per-share (EPS) also falling 21% and 56%, respectively.1 While the $5 billion sales decline during 2009 was the largest year-over-year in company history, net income of $900 million ranks among the highest in the companys history.2 Inventories on hand, valued using the LIFO method, declined by $1 billion during 2009, in turn reducing overall receivables. This decision was partially driven by managements focus on keeping inventories at historical percentages of current assets despite the downturn in equipment sales. For active receivables, John Deere establishes trade accounts with large Implement Dealers who in turn pay interest to John Deere Credit until the good is sold at retail.3 Consequently, most of John Deeres credit risk is concentrated in the agricultural sectorImplement Dealers hold $2.072 billion of the total outstanding $3.235 billion. Cash and cash equivalents increased by 110% to $4.65 billion and accounts payable fell by more than $1 billion. However, a healthy current ratio of 2.3x indicates adequate liquidity. Despite tightening credit conditions, John Deere generated $9 billion in cash from debt issuanceenough to pay most maturing securities due through 2010.4 Currently, accounts payable total $5.4 billion and financing receivables

1 2

8-k John Deere filed with the SEC prior to the November 25th earnings call Q409 Earnings Call Transcript 11/25 3 Q409 Earnings Call Transcript 11/25 4 Q409 Earnings Call Transcript 11/25

amount to $15.2 billion. The firms current receivables turnover ratio is 7.0x (the second highest in the past ten years), indicating John Deere is collecting in a timely manner. However inventory turnover, a measure closely aligned with John Deeres core operations, is at the lowest level since 20015.9x per year. In terms of long-term solvency, the total debt-to-equity percentage is 510%, which mirrors John Deeres debt-heavy capital structure. Furthermore, the overall capital structure is on par with other capital-intensive companies. The average debt to total capital for U.S. Auto and Truck Manufacturers, for example, is over 80%.5

2.3. Competitive Landscape

Direct competitors in the agricultural and construction machinery sector include Caterpillar (USA), Case New Holland (USA), and Kubota (Japan). Over the past five years, these companies have collectively prospered from favorable commodity prices and the construction boom and suffered from their subsequent collapses [Exhibit 4]. Interestingly, the companies stock prices are more highly

correlated with the performance of the S&P 500 than they are with the price of corn bushels or new housing starts [Exhibit 5]. Nonetheless, John Deere has a stronger correlation with corn prices than its competitors; not surprising given the segmentation of the business. Unexpectedly, housing starts

correlations are negative for three out of four companies, perhaps suggesting a lag between housing starts and company performance [Exhibit 6].6 John Deere performs well relative to its competitors based on the evaluation of key accounting metrics identified in the company overview. [Exhibit 7]. John Deere weathered the economic crisis better than its competitors; total revenues decreased less and gross profit percentage remained the highest in the industry. Additionally, John Deere performs comparatively well in critical industry metrics

including accounts receivable and inventory turnover. This serves as evidence of the firms efficiency in collecting on accounts and converting inventory into salesboth critical metrics since their collective sum makes up 20% of current assets. Despite high debt levels, the current ratio and EBIT/Interest both suggest John Deere can handle this burden and is capable of paying off these obligations as they mature.

5 p 485 Berk, DeMarzo, Harford 6 Kubotas correlation with housing starts is uniquely positive at: .0.09

Additionally, John Deeres accounting practices deviate from those of it competitors, particularly pertaining to revenue recognition and inventory valuation [Exhibit 8]. inconsistencies when interpreting comparative metrics across the industry. This may lead to some

3. STRATEGIC RECOMMENDATIONS
John Deere has outlined an aggressive growth strategy moving forward and aims to increase SVA by seven percent on average over the business cycle. Achieving sustainable SVA growth will rely on higher sales in more markets with relevant products that create value for customers. Accordingly, John Deere must consider strategic options that directly contribute to SVA growth over varied time horizons. Strategy Timing Short-term Medium-term Long-term Recommendation Monitor stock price for buyback opportunities Improve quality of 100 Series Tractor Expand operations and sales in Brazil Own the value chain of developing wind farms SVA Impact Non-optimal buybacks decrease shareholder value Mitigate warranty exposure Smooth revenues and earnings Increase presence in growing market

4. FINANCIAL RECOMMENDATION ANALYSIS

John Deere is highly leveraged with over 80% debt. As a result, the weighted average cost of capital (WACC) sensitivity analysis uses the most conservative (i.e, highest) rate to discount cash flows [Exhibit 9]. Consequently, the discounted cash flow (DCF) calculation supports the idea that investors will demand a higher return on debt. Using the 7.92% WACC to discount cash flows, the projected value of John Deeres stock is $51.18 [Exhibit 10]. For sensitivity purposes, the lowest WACC rate is 7.73% and yields a stock price of $53.22. As of December 11th, John Deeres stock closed at $52.44high considering the stocks 52-week range of $24.51-$55.407. Though John Deere issued equity in recent years, their overall debt percentage continues to climb. Driven by managements recent stock repurchases, John Deeres treasury stock account contains 114 million shares, valued at $5.6 billion as of fiscal year end 2008 [Exhibit 11].8 The cash flows from financing are primarily reserved for buying back shares and increasing dividends. The current stock price is within the discounted cash flow calculation range. Hence, there is no opportunity to capitalize on an undervalued stock price at this time. If general market volatility continues

7 8

Stock prices from finance.yahoo.com 2008 Annual Report

and John Deeres stock price falls as a result, management should aggressively repurchase stock, barring any negative changes that directly impact future cash flows and growth.

5. CHANNEL & MARKET STRATEGY

5.1. Brand Reputation
The John Deere brand stands for quality, innovation, integrity, and commitment. These attributes are synonymous with the iconic green and yellow color scheme. John Deeres enjoys a high level of brand loyalty. For 170 years, the company has earned the trust of farmers by delivering high-quality, innovative products that help create value from the land. By leveraging the brands reputation and helping farmers thrive, loyalty toward the John Deere brand will drive continued growth.

5.2. Target Market Segmentation

The segmentation decision involves decomposing a market into homogenous subgroups and selecting target segments within operating divisions. The riding lawn mower product category provides valuable insight into John Deeres approach to market segmentation. In our evaluation, the Agriculture and Turf Division targets three major consumer segments: Commercial Farmers Landscaping Professionals Do It Yourselfers (DIY)

This segmentation decision allows John Deere to build a product portfolio that expands quality and functionality based on end user demands. Within the riding mower product category, the main consumer segments are Landscaping Professionals and DIYs. These segments have important ramifications on channel selection for John Deere because they deviate from the companys core agricultural customers. Positioning John Deeres famous positioning statement, nothing runs like a Deere, communicates both differentiation from the competition and meaningfulness within the target segment. This statement

reinforces the key quality attributes inherent in John Deeres reputation and positions the brand as a source of value for the consumer. From a job completion perspective, John Deere claims that its tractors get the job done faster than the competition, a message that John Deere promotes in the product catalog.

By completing more jobs faster, farmers and landscapers can increase efficiency and enhance their revenue stream.

5.3. Channel Strategy & Product Mix

100 series tractor The 100 series tractor is a riding lawn mower designed specifically for the Home Center channel. John Deere developed this product line to gain strategic distribution in the retail marketplace. Importantly, the 100 Series is not officially produced to John Deere specifications and is considered to be at the lower end of the product quality continuum. These tractors come with a two-year warranty and typically range between $1,500-$2,500 MSRP. This occupies a lower price point than the traditional assortment at John Deere Implement Dealers. This adjustment in quality helps John Deere achieve lower costs per unit, which translates into lower retail prices. However, the sacrifice of quality in the pursuit of lower retails may come at the detriment of brands reputation. Channel Strategy John Deere uses two primary channels to distribute products from the Agricultural and Turf division: Home Center retailers and Implement Dealers. The differences between these segments are numerous, and the channel strategy requires a delicate balance between product mix and pre- and post-sales service models. Home Centers Home Center retailers such as Home Depot and Lowes make up a significant proportion of unit sales for the Agricultural and Turf division. These channels offer a seasonal assortment of lawn tractors and mowers. The John Deere 100 Series Tractor was developed for placement in the Home Center channel. Importantly, the Home Centers do not offer any product service or part replacement for John Deere tractors. These retailers lack the internal infrastructure to remain competitive in this model forcing consumers to visit John Deere Implement Dealers for parts and service needs. This creates consumer frustration. Another dynamic of the retail channel is the seasonal nature of the business with most sales registering in the months of May through August. John Deere offers mark down money to help Home Center retailers manage their end-of-season inventory levels. For instance at Home Depot, remaining tractors in inventory are marked down to sell through all remaining units around mid-August. John Deere funds the majority of this retail price adjustment. 8

John Deere Implement Dealers The dealership network competes with Home Center retailers on the 100 Series Tractors. While their MSRP is consistent, John Deere offers no assistance for inventory mark down at the end of the season to their Implement Dealers. This is a major source of contention in the channel relationship. To

differentiate themselves from the Home Centers, the dealers are the main destination for replacement parts and service. This is a significant opportunity for incremental revenue. Additionally, the Implement Dealers carry an expanded assortment of high-end John Deere riding tractors. The X Series, exclusive to the dealer network, comes with a four-year warranty. The product line is manufactured at higher quality standards than the 100 Series. The service and replacement business coupled with the extended product line helps the dealers remain competitive. Recommendation The 100 Series Tractor allowed John Deere to expand distribution in pursuit of the targeted consumer segment. While this strategic product extension was successful, there are lingering product quality concerns. Consumer reports indicate the 100 Series suffers from patchy performance in rugged terrain [Exhibit 12]. This disconnect in product quality and performance jeopardizes the integrity of the John Deere brand at retail. A determined effort to improve product quality and remedy performance of the 100 Series will strengthen John Deeres brand reputation.

6. GLOBAL EXPANSION
Since 2001, John Deere has placed a significant strategic focus on expansion into markets outside the United States and Canada. According to John Deeres 2008 Annual Report: Profitably extending the John Deere brand to a wider worldwide customer base remains a top growth priority, as well as an area of considerable achievement. [In 2007], Deere sales outside the United States and Canada surpassed $10 billion for the first time. Sales in the emerging markets of Brazil, Russia, India, and China continued their strong growth9 In an increasingly global economy, John Deere has recognized the need to participate in markets beyond the U.S. and Canada. Driven by a growing worldwide population, increased operating efficiency, and overall higher demand for high quality crops, John Deere has made considerable investments in foreign markets particularly those within the European Union [Exhibit 13]. Outside of the U.S. and Canada, revenues in foreign markets have grown 370% since 2000 and operating profits have climbed 683% over the same time period [Exhibit 14].
9

Deere & Company 2008 Annual Report

Despite this impressive growth, significant opportunities still exist. Specifically, Southeastern-Asian markets like China and India as well as South American markets such as Brazil and Argentina are ripe targets for increased production, sales, and overall growth [Exhibit 15].

6.1. Expansion in Brazil

Despite the current financial crisis, the market demand for agricultural machinery in South America shows great strength. According to John Deeres 4th Quarter Earnings Call Press Release farm machinery sales in the U.S. and Canada are forecasted to fall about ten percent in 2010 as a result of sluggish overall economic conditions. Farm machinery sales in Western Europe are forecasted to decline 15 percent for the year, mainly due to weakness in the livestock, dairy and grain sectors. However, in South America industry sales are projected to increase by 15 percent for the year. Among other positive factors, parts of South America are benefiting from a return to more normal weather patterns after last years severe drought. This positive news provides a solid foundation for John Deeres continued expansion in the Brazilian market. The Foreign Agricultural Service (FAS) estimates that 70-90 million hectares of arable land, or 40-50% of Brazils existing pasture acreage, could be converted to crop-yielding land. In terms of agricultural machine imports, purchases of tractors, harvesters, threshers, and milk machines have been increasing very steadily. According to U.S. Commercial Service, in the first 11 months of 2008 the agricultural machinery sector negotiated 50.8 thousand units in the local market, up 42.8% in volume from the same period in 2007.10 Similar to other emerging markets, Brazil presents challenges. While these obstacles do not outweigh the opportunities inherent in Brazil, it is worth noting the unique obstacles John Deere may face when expanding operations in this market, including: Taxes. Recent institution of new agricultural export taxes. Infrastructure. Serious reduction or cessation of new infrastructure development. Commodity prices. Significant slump in international agricultural commodity prices. Crop destruction. Greater domestic prevalence of crop diseases or pests.

10

Brazil: Agricultural Machinery Sector Update, U.S. Commercial Service, U.S. Department of Commerce, May 09.

10

Regulation. New environmental laws increasing restrictions on land conversion and/or preservation.

Despite these challenges, Brazil is determined to increase investment in agricultural infrastructure to increase production, transportation, and exports. One example of the emphasis the country places on agricultural growth is the So Paulo state governments Pro Tractor program. The program offers five year loans at a zero percent interest rate for purchases on 50-120 horse power tractors. This, in addition to the abundance of resources in Brazil, suggests that John Deere can capitalize on the significant growth projected in the Brazilian market.

7. WIND ENERGY
John Deere has been working in wind energy for the better part of the decade. There are two main reasons why John Deere invests in wind energy projects. The first reason concerns John Deeres values and what the John Deere brand represents. John Deere supports rural economies in the U.S. and around the world through their agriculture, forestry and construction, and credit divisions. The brand is

synonymous with farming and rural economies. Wind farms in rural areas provide renewable energy, increase tax base, and create jobs in rural communities. These farms can be built on land with no impediment to agriculture. In fact, farmers view wind energy as another cash crop and increase the profit per acre. This partnership benefits the farmer, John Deere, and the world. Secondly, from 2005-2008 world wind generation capacity increased over 100% and U.S. wind generation capacity increased 175% [Exhibit 16]. There have been numerous reasons for this growth including high oil prices, government subsidies, and concerns about greenhouse gas emissions. By 2014, worldwide wind energy capacity will be almost 300,000 megawatts (MW) with the U.S. representing 30% of this production. This is 300% growth for the world and 800% growth in the U.S. This rapid growth industry represents an important growth segment for John Deere. Currently, John Deere pursues wind energy projects with energy purchasers, landowners, and developers in similar capacities [Exhibit 17]. Depending on the situation, John Deere provides land acquisition, financing, project management, technical assistance, third party turbines, and assistance with long time operations. Over the past two years, John Deere has helped install and operate more than 330 MW of wind energy. 11

However, the one aspect of the wind farm value chain that John Deere is not capturing is the turbine component. John Deere purchases turbines from third party suppliers such as GE or Suzlon to equip their wind energy projects. The subsequent analysis demonstrates substantial value for John Deere by

manufacturing wind turbines. The average turbine manufacturer has a 6.9% profit margin [Exhibit 18, 19]. If an NPV analysis on a typical John Deere wind farm project (55 MW and 20 years) is performed, the 6.9% profit margin significantly affects the NPV of project for John Deere [Exhibit 20]. By producing turbines, John Deere can capture this margin instead of paying it to a third party. For the example project, this would add about $55,000 of NPV per MW installed [Exhibit 21]. Combining this number with growth rates for the industry, an estimate of the lifetime value to John Deere is apparent. Depending on the industry growth rates used, this would represent a NPV of $47 million - $162 million [Exhibit 22]. This means John Deere would value turbine production at a minimum of $47 million. John Deere should seriously consider wind turbine producers as a potential acquisition. There has been considerable consolidation in the turbine industry over the last ten years, but there are still candidates worthy of evaluation. John Deere should look for a domestic manufacturer because the companys wind energy business operates in the U.S. They should look for a manufacturer that builds turbines at least 1 MW in size, since that is the minimum size installed in their projects. The $47 million is the minimum worth to John Deere. Any turbine capacity not consumed by John Deeres developments could be sold to other wind developers generating additional positive NPV.

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8. EXHIBITS & DETAILED ANALYSIS

EXHIBIT 1: SEASONAL NET INCOME
Net Income by Quarter
(millions)
Q1 Q2 Q3 Q4

$1,000.0 $744.6 $604.0 $500.0 $127.8 $2001 $(500.0) 2002 2003 2004 2005 2006 2007 $141.8 $256.9 $477.3 $623.6

$763.5 $472.3

2008

2009

EXHIBIT 2: SHAREHOLDER VALUE ADDED (SVA)

Shareholder Value Added (SVA) essentially, the difference between operating profit and pretax cost of capital is a metric used by John Deere to evaluate business results and measure sustainable performance. In arriving at SVA, each equipment segment is assessed a pretax cost of assets 12% of average identifiable operating assets with inventory at standard cost (believed to more closely approximate the current cost of inventory and the companys related investment). Financial-services businesses are assessed a cost of equity of approximately 18% pretax. The amount of SVA is determined by deducting the asset or equity charge from operating profit. DEERE EQUIPMENT OPERATIONS $MM unless indicated Net Sales Operating Profit Average Assets With Inventories @ Standard Cost With Inventories @ LIFO OROA % @ LIFO Asset Turns (Standard Cost) Operating Margin OROA % @ Standard Cost Average assets @ Standard Cost Operating Profit Cost of Assets SVA 2006 $19,884 $1,905 $8,634 $7,546 25.2 2.30 x 9.58 22.1 $8,634 $1,905 -$1,036 $869 2007 $21,489 $2,318 $9,205 $8,092 28.6 2.33 x 10.79 25.2 $9,205 $2,318 -$1,224 $1,224 2008 $25,803 $2,927 $10,812 $9,652 30.3 2.39 x 11.34 27.1 $10,812 $2,927 -$1,284 $1,643

NOTE: Deere Equipment Operations, to create and grow SVA, are targeting an operating return on average operating assets (OROA) of 20% at mid-cycle sales volumes in any given year and other ambitious returns at other points in the cycle. (For purposes of this calculation, operating assets are average identifiable assets during the year with inventories valued at standard cost.)

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EXHIBIT 3: ORGANIZATIONAL S TRUCTURE

Total Revenues (2009)
John Deere Other ($0.43B) Credit ($1.9B) 2% 8% Construction & Forestry ($2.6B) 11%

Agriculture & Turf ($18.1B) 79%

EXHIBIT 4: J OHN DEERE AND COMPETITORS STOCK PRICES

Stock Performance John Deere and Competitors

450

Normalized Stock Price (100 = 1/1/2004)

400 350 300 250 200 150 100 50 0 1/2/2004 1/2/2005 1/2/2006 1/2/2007 1/2/2008 1/2/2009

DE

CAT

CNH

KUB

S&P

This chart shows the relative performance of John Deeres stock against competitors (Caterpillar, Case New Holland, Kubota) and an index (S&P 500).

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EXHIBIT 5: COMPETITIVE CORRELATION T ABLES

Correlation Table S&P CP HS DE 0.73 0.30 -0.21 CAT 0.29 0.00 -0.05 CNH 0.04 0.05 -0.22 KUB 0.11 0.15 0.09

This table depicts the correlation between monthly price movements between Deere and its competitors. The S&P, DE, CAT, CHN, and KUB were all pulled from Yahoo Finance. Corn price per bushel, CP, was pulled from the United States Department of Agriculture, and new housing starts, HS, was pulled from the Department of Commerce. The bolded entries are the highest values in their column. The correlations were calculated by taking the covariance of the prices as well as their variances. Those values are displayed in the tables below.

Covariances S&P CP HS DE 0.0031 0.0026 -0.0017 CAT 0.0013 0.0000 -0.0005 CNH 0.0003 0.0008 -0.0028 KUB 0.0005 0.0014 0.0008

DE CAT CNH KUB S&P CP HS

Variances Standard Deviation 0.009 0.096 0.011 0.105 0.025 0.158 0.011 0.106 0.002 0.043 0.008 0.091 0.007 0.081

EXHIBIT 6: J OHN DEERE STOCK PRICE RELATIVE TO INDEXES

15

John Deere Stock Price Relative to Indexes

350 300 250 200 150 100 50 0 1/2/2004 1/2/2005 1/2/2006 1/2/2007 1/2/2008 1/2/2009

Normalized Price (100=1/1/2004)

DE

S&P

Corn Prices

Housing Starts

This chart shows the relative performance of John Deeres stock prices with different indexes.

EXHIBIT 7: ACCOUNTING COMPARISON

Revenue Growth Gross Margin Account Receivables Turnover Ratio Inventory Turnover Ratio Total Debt to Equity Current Ratio EBIT/ Interest Exp

John Deere -18.7% 26.4% 7.0x 5.9x 509.5% 2.3x 2.8x

Caterpillar -26.0% 22.0% 4.5x 3.5x 404.1% 1.5x 1.6x

Case New Holland -24.8% 21.8% 1.2x 2.7x 150.1% 1.8x 1.2x

Kubota -16.0% 26.1% 2.0x 3.6x 73.6% 1.8x 35.9x

This table compares John Deere to its competitors in some key metrics. The first section deals with profitability and demonstrates John Deere has held up relatively well during the financial crises. The second section details some key turnover rations for the industry, which generally has high levels of accounts receivable and inventory turnover. The last section deals with debt and a companys ability to finance that debt. Please note all data is from CapitalIQ. Leaders in each category are bolded.

EXHIBIT 8: ACCOUNTING METHODS

Column1 John Deere Revenue recognition: Recorded at time of sale Inventories in U.S.: LIFO Inventory valuation: Remaining inventories: FIFO

Kubota Percentage of completion method Average cost method (lower of cost or market)

Caterpillar Installment method FIFO (lower of cost or market)

Case International Installment method FIFO (lower of cost or net realizable value)

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EXHIBIT 9: WEIGHTED AVERAGE COST OF CAPITAL

WACC is calculated using both the security market line and the weighted average cost of capital formula Beta of assets is calculated with the WACC formula Beta of Equity is given in the Deere financials downloaded from Capital IQ. It is also duplicated through a regression model, which comes out to the same Beta of 1.64 Beta of Debt is an SML formula calculation Return on equity is a sliding scale based on the return on equity required for Deeres financing division from their 2008 Annual Report and the SML Calculation Return on debt scales between the weighted average of return on Deeres current debt outstanding and the average required return for A rated securities like Deere at a 30-year rate Risk free rate varies between the 10 30 year Treasury Yield rates from the United States Treasury website Market return is 13% from Ibbotson Associates, Inc. average annual rate of return on common stocks from 1926 1997 Capital structure uses year-end 2009 percentages of Deeres debt and equity

17

EXHIBIT 10: DISCOUNTED CASH FLOW

18

Inputs to DCF:

19

Deere provides revenue broken out by four segments: construction & forestry, credit, other, and agricultural equipment

Revenues for each segment are projected through the next five years using company guidance as well as analyst reports from JP Morgan and Barclays Capital In 2010, the Construction & Forestry and Agriculture Equipment segment growth is based on company guidance, but Credit and Other use an average of JP Morgan and Barclays growth percentages In 2011, all four segments grow by the average analyst projections 2012 uses Barclays Capital projections For the remaining seven years, projected growth for each segment uses the average of each segment for 2000 2009 Terminal growth for all segments is 3%

John Deeres wind division is part of their credit segment Estimated their 2009 revenue to be $450 million Based on the NPV projections and estimates for growth in wind energy, the division is given its own growth rates that mirror the wind energy NPV exhibit The growth rate is 20% for 15 years followed by a terminal growth rate of 3.5% Since wind energy is expected to provide a very high growth rate in the near future, we are heavily weighting growth for the first fifteen years

This assumes that the systematic risk of new projects within each segment is folded into the WACC calculation.

EBIT, Depreciation & Amortization, Cash from Working Capital and Capital Expenditure are based on their 2000 2009 average percentages of revenue

The effective tax rate is an average of the rates between 2000 and 2009 sans 2001 (there is no data for that year)

Terminal Growth If the 10 year average growth for a segment is less than 3% (assumed perpetual economic growth), then the terminal value uses that percentage for the perpetuity 20

Ag equipment and construction and forestry, the terminal perpetuity assumes a 3% growth

Average cash flow from working capital for 2000 2009 is negative at an average of 4% of Revenue Using that percentage creates negative cash flows for all projected years As an adjustment to make the cash flow feasible, average cash flow percentage negative but adjusted to 1% of revenue.

During 2009 the company rolled their commercial and consumer equipment segments under ag equipment

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EXHIBIT 11: STOCK REPURCHASE

22

EXHIBIT 12: CONSUMER REPORT

23

This consumer report rates the John Deere LA115 riding mower from the 100 series product line. Product performance is the main area of improvement

ConsumerGuide.com Expert Review: John Deere LA115 Lawn Tractor. Editors of

ConsumerGuide.com, http://products.howstuffworks.com/john-deere-la115-lawn-tractorreview.htm April 7, 2008

EXHIBIT 13: GLOBAL OPERATIONS

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EXHIBIT 14: INTERNATIONAL GROWTH

Revenues Earned Outside the U.S. & Canada

(millions)
$17,065

U.S. & Canada Outside U.S. & Canada

$11,110 $10,003 $10,061 $10,149 $14,762 $13,395

$15,506

$15,754

171% Growth

$11,008 $7,894 $5,554 $6,090 $6,249

370% Growth

$2,976

$3,054

$3,631

$4,265

2000

2001

2002

2003

2004

2005

2006

2007

2008

Operating Profits Outside the U.S. & Canada

(millions) U.S. & Canada Outside U.S. & Canada
$1,697 $1,729 $2,249 $1,915 $2,025

283% Growth (U.S.)

$1,171
$794 $580 $855

683% Growth

$846 $674 $604 $511

$171

$133
$119

$237

$357

2000

2001

2002

2003

2004

2005

2006

2007

2008

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EXHIBIT 15: BRAZILIAN AGRICULTURAL GROWTH

Agriculture Sales Growth Forecast

South America 15%

North America -10% Western Europe -15%

Soybean Production Growth

1997: Top 5 Soybean Producing Countries
(1000 MT)
Rest of the World 12,583,759 Argentina 11,004,890 Brazil 57,857,200

2007: Top 5 Soybean Producing Countries

(1000 MT)

Brazil 26,391,448

119% growth in Brazil

Argentina 47,482,784

United States of America 73,177,000

China 14,736,722 United States of America 72,860,400

China 13,800,147

India 6,463,100

Rest of the World 17,564,081

India 10,968,000

Corn Production

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Corn Production
(millions of bushels)

2008

2009

% of the World 39.11% 20.70% 7.25% 6.88% 3.06% 2.36% 1.91%

United States 307,386 307,100 China 165,500 162,500 EU-27 62,380 Brazil 50,500 Mexico 25,000 India 17,000 Argentina 13,000 56,902 54,000 24,000 18,500 15,000

EXHIBIT 16: WIND ENERGY GROWTH

Actual Capacity (MW) 2005 2006 2007 The World 59,036 74,154 93,928 100 126 159 United States 9,149 11,603 16,819 100 127 184 % of World 15.50% 15.65% 17.91%
11

Projected Capacity (MW) 2008 2009 2010 2011 2012 2013 2014 121,091 139,444 160,578 184,915 212,941 245,214 282,379 205 236 272 313 361 415 478 25,170 30,875 37,874 46,458 56,989 69,906 85,752 275 337 414 508 623 764 937 20.79% 22.14% 23.59% 25.12% 26.76% 28.51% 30.37%

The above table shows the actual and projected wind power capacity in the World in the United States. The bottom row shows what percent of the worlds capacity resides in the United States.

Average Growth World US 27.06% 40.48%

Dampening Factor 56% 56%

Growth Rate Used for Projection 15.16% 22.67%

The above tables growth rates are determined by the actual wind energy capacities from 2005-2008. The dampening factor brings 2009 projections in line with those of the World Wind Energy Association, a trade group. Capacity growth slowed down in 2009 due to the credit crisis and drop in crude oil prices.

11

World Wind Energy Association, World Wind Energy Report 2008

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Wind Energy Growth

1,000 900

837%
Projection

300,000 250,000 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000

800 700 600 500 400 300 200 100 0

378%

3
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

World Capacity

US Capacity

World Growth

US Growth

EXHIBIT 17: CURRENT J OHN DEERE SERVICES

Landowner

Project Management Services Technical Support Debt & Equity Financing Siting and Design Turbine Supply Long-Term Management Knowledge of Rural Economic Growth

X X X X X X

X X

Developer

Wind Energy Services Currently Supplied by John Deere

Energy Purchaser

X X X X X X

12

he above table references the current services John Deere supplies to different customers when developing wind farms.

12

http://www.deere.com/en_US/jdc/product_financing/wind_energy/index.html

Wind Generation Capacity (MW)

275,000

Wind Energy Growth (2005 = 100)

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Installed Capacity State MW 2008 Harvest Michigan 52.8 Michigan Wind 1 MIchigan 69 Texas Texas 50 Total: 171.8 2009 Cassia Idaho 30 Echo Oregon 64 Mountain Home Idaho 42 Three Mile Canyon Oregon 9.9 Tuana Springs Idaho 16.8 Total: 162.7 2010 Greensburg Kansas 12.5 Total: 12.5 2008 & 2009 Average: 167.25

13

The above table documents wind farms that have been developed and financed by John Deere. The figure gives an average capacity that can be used to extrapolate future growth with projected growth rates.

EXHIBIT 18: WIND T URBINE PRODUCERS

Company Vestas GE Energy (GE) Gamesa Top Ten Enercon Wind Suzlon Turbine Siemens Producers Acciona 2007 Goldwind Nordex Sinovel Other Mitsubishi Heavy Industries Companies Clipper Windpower in US Northern Power Systems Market REPower
1415

Country Denmark USA Spain Germany India Germany Spain China Germany China Japan UK USA Germany, India

Issue Not Listed Conglomerate Foreign Not Listed Foreign Foreign Conglomerate Foreign Conglomerate Foreign Foreign Foreign, not Listed Foreign Conglomerate Not Listed Private Foreign

Installed Return on Operating Capacity (MW) Equity Beta Debt% Assets Margin 4,500 3,300 3,050 2,700 2,000 1,400 870 830 670 670 1.91 1.57 1.85 2.41 1.38 1.47 2.24 1.26 2.02 1.79 9.00% 8.20% 80.40% 1.60% 36.33% 2.30% 56.40% 6.60% 36.70% 2.90% 72.60% 3.10% 31.70% 9.80% 5.20% 4.50% 50.40% 1.40% 1.80% -20.50% 2.00% 3.10% 7.70% 9.90% 6.70% 2.10% 4.60% 7.90% 16.70% 4.60% 0.80% -33.30% 3.90%

The table above and below are used to estimate key statistics about the wind turbine manufacturing industry. The Equity beta and capital structure is used when calculating the NPV of John Deere manufacturing its own wind turbines. The operating margin is used to determine the money John Deere would save if it manufactured its own turbines as opposed to buying them from third party suppliers such as GE and Suzlon.

13 14

http://www.deere.com/en_US/renewable_energy/wind_energy/projects.html Wind Capacity (MW installed in 2007) information from Annual Reports, and industry reports. 15 All other data from CapitalIQ, a Standard and Poors business unit: https://www.capitalIQ.com

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Company Vestas Gamesa Suzlon Goldwind Nordex

Installed Capacity (MW) 4,500 3,050 2,000 830 670

Percent Percent Beta Capacity Capacity 40.72% 44.03% 27.60% 29.84% 18.10% 19.57% 7.51% 6.06% 6.56% Estimates for Project

Equity Beta 1.91 1.85 2.41 2.24 2.01

Debt% 9.00% 36.33% 56.40% 31.70% 5.20% 26.60%

Return on Operating Assets Margin 8.20% 7.70% 2.30% 6.70% 6.60% 2.10% 9.80% 16.70% 4.50% 4.60% 6.18% 6.90%

This table represents a subset of the above table. It was difficult to determine key metrics for this industry for a number of reasons. First and foremost, many wind turbine manufacturers are subsidiaries of conglomerates and finding data for a specific unit is challenging. Secondly, many manufacturers are foreign, which makes it more difficult to find their data. Thirdly, some manufacturers are private, and are not legally required to publish financial statements. The above subset represents companies that mostly manufacture wind turbines and had available data. The industry averages are weighted by the companys installed wind energy capacity in 2007.

EXHIBIT 19: UTILITIES WITH WIND ENERGY

Company FPL Group Inc. TransCanada Corp. FirstEnergy Corp. Xcel Energy Inc. Wisconsin Energy Corp. NRG Energy, Inc. The AES Corporation Pinnacle West Capital Corp. Emera Inc. Westar Energy Inc. Integrys Energy Group, Inc. Great Plains Energy Inc. Hawaiian Electric Industries Inc. Portland General Electric Company ALLETE, Inc. CH Energy Group Inc. Otter Tail Corporation PNM Resources Inc. El Paso Electric Co.

Market Cap Market ($US mil) Cap % $ 17,086 23.05% $ 13,973 18.85% $ 10,910 14.72% $ 7,354 9.92% $ 4,273 5.77% $ 3,860 5.21% $ 3,271 4.41% $ 2,323 3.13% $ 1,637 2.21% $ 1,622 2.19% $ 1,528 2.06% $ 1,332 1.80% $ 1,109 1.50% $ 900 1.21% $ 729 0.98% $ 605 0.82% $ 550 0.74% $ 537 0.72% $ 526 0.71% Industry Values

Beta Equity 0.64 0.39 0.52 0.44 0.38 1.05 1.53 0.62 0.13 0.62 0.86 0.80 0.56 0.75 0.70 0.40 1.13 1.01 0.70 0.60

Debt % 58.40 55.60 64.30 54.20 58.10 52.00 69.90 52.70 61.90 54.80 48.50 55.10 54.30 50.60 41.40 48.00 43.80 47.70 53.00 57.41

Debt Rating (S&P) A A BBB BBB+ BBB+ BBBB BBBBBB BBBBBB+ BBB BBB BBB+ BBB+ A BBBBBBBB BBB+

16

The above table represents electric utilities in the United States and Canada who operate wind farms in their portfolio of generation sources. These industries values will be used to assess the risk of John Deere running a wind farm. Once again, finding the appropriate proxy for risk for running a wind farm is difficult. There are not publically traded companies whose sole focus is running wind farms. Many companies own wind farms, but this is a part of diverse operations. Therefore, it is reasonable to take utilities that do operate wind farms as a proxy for the
16

All data from CapitalIQ, a Standard and Poors business unit: https://www.capitalIQ.com

30

risk of John Deere running a wind farm. Utilities tend to have low betas, but because the wind turbine manufacturers above have high betas, the overall calculations should be relatively conservative. Additionally, sensitivity analysis is done to make sure assumptions hold.

EXHIBIT 20: NPV

The basic premise for the following NPV analysis is this: compare two projects that are exactly the same except one where the operating margin of producing wind turbines is captured by John Deere. The example is a 55 MW wind farm and over a 20 year life span. This length is a conservative estimate, but is typically how John Deere structures its agreements; the MW is an average John Deere project.

DISCOUNT RATE
The rate used to discount the following NPV analysis is based on the industry numbers for electric utilities with wind energy in their portfolio. The average beta of equity was 0.60 and their BBB+ debt rating translated into a return on debt of 5.95%17. Combing this information with the capital structure of the industry, 57% debt, and the CAPM, the appropriate discount rate for this project is 7.5%. A risk free rate of 4.38%18, and a 13%19 market return was used.

GROWTH RATES
Revenue growth is projected at 3%, while costs are expected to grow with inflation, around 2%. Both these estimates are conservative.

WIND F ARM
The price received for the power used is $0.09 per kWh. The capacity factor is a conservative 22%, as more modern windfarms tend to be in the 25%-30% range. Capacity factors determines how efficent a turbine is at converting wind to electricity. There is a $0.02 tax credit per kWh produced over the first ten years of the project, which is provided by the federal government. There is a $20,000 maintance fee paid to the landowners of the project. For a project this size, this would amount to 1820 landowners and an annual maintainance fee of $360,000. Operating costs are forecast at $500,000 per year and will grow with inflation.

F INANCING21
John Deere puts up 45% through equity and arranges for 50% of debt financing. The debt financing will be in the form of a 20 year loan with an interest rate of 5.68%, which corresponds to John Deeres A bond rating22. The remainging 5% of equity financing will come from the landowners themselves. All the financing will pay for the initial cost of the wind farm construction. This number is arrived at by multiplying John Deeres cost per MW23 by the size of the farm. The 90:10 split on equity entitles John Deere to 90% of the profits generated by the project.

DIFFERENCE BETWEEN TWO ANALYSIS

The only difference between the two analyses is the initial cost per MW. The first value is what John Deere currently pays per MW to develop a wind farm. The second number is discounted by the operating margin of wind turbine manufacturers from the above exhibit, 6.9%. If John Deere manufactured its own turbines at a cost similar to the industry average, they would be able to save the operating margin. This lowers the initial cost of the wind farm and increases the NPV per MW to John Deere.
17 18

Debt Rating was converted into a return on debt using information from Bloomberg. Current 30 year Treasury Bond Yield 19 From Module 5 Finance 700 20 Typical John Deere projects have about 5 turbines per landowner 21 Structure of current John Deere Wind Energy Projects 22 Debt Rating was converted into a return on debt using information from Bloomberg. 23 Data from John Deere 2008 Annual Report

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TURBINE OPTIONS

B: NPV John Deere producing Wind Turbines

2 $ $ 886,867 $ 1,965,601 $ 10,120,604 $ 2,119,920 $ 2,314,285 $ 2,833,932 $ 991,876 $ 1,842,056 3 $ $ 897,271 $ 1,965,601 $ 10,424,222 $ 2,119,920 $ 2,314,285 $ 3,127,146 $ 1,094,501 $ 2,032,645 4 $ $ 907,883 $ 1,965,601 $ 10,736,949 $ 2,119,920 $ 2,314,285 $ 3,429,261 $ 1,200,241 $ 2,229,019 5 $ $ 918,707 $ 1,965,601 $ 11,059,057 $ 2,119,920 $ 2,314,285 $ 3,740,545 $ 1,309,191 $ 2,431,354 6 $ $ 929,748 $ 1,965,601 $ 11,390,829 $ 2,119,920 $ 2,314,285 $ 4,061,276 $ 1,421,447 $ 2,639,829 7 $ $ 941,010 $ 1,965,601 $ 11,732,554 $ 2,119,920 $ 2,314,285 $ 4,391,739 $ 1,537,109 $ 2,854,630 8 $ $ 952,496 $ 1,965,601 $ 12,084,531 $ 2,119,920 $ 2,314,285 $ 4,732,229 $ 1,656,280 $ 3,075,949 9 $ $ 964,213 $ 1,965,601 $ 12,447,066 $ 2,119,920 $ 2,314,285 $ 5,083,048 $ 1,779,067 $ 3,303,981 10 $ $ 976,164 $ 1,965,601 $ 12,820,478 $ 2,119,920 $ 2,314,285 $ 5,444,509 $ 1,905,578 $ 3,538,931 11 $ $ 621,687 $ 1,965,601 $ 13,205,093 $ $ 2,314,285 $ 8,303,520 $ 2,906,232 $ 5,397,288 12 $ $ 634,121 $ 1,965,601 $ 13,601,246 $ $ 2,314,285 $ 8,687,239 $ 3,040,534 $ 5,646,706 13 $ $ 646,803 $ 1,965,601 $ 14,009,283 $ $ 2,314,285 $ 9,082,594 $ 3,178,908 $ 5,903,686 14 $ $ 659,739 $ 1,965,601 $ 14,429,561 $ $ 2,314,285 $ 9,489,937 $ 3,321,478 $ 6,168,459 15 $ $ 672,934 $ 1,965,601 $ 14,862,448 $ $ 2,314,285 $ 9,909,629 $ 3,468,370 $ 6,441,259 16 $ $ 686,393 $ 1,965,601 $ 15,308,322 $ $ 2,314,285 $ 10,342,043 $ 3,619,715 $ 6,722,328 17 $ $ 700,121 $ 1,965,601 $ 15,767,571 $ $ 2,314,285 $ 10,787,565 $ 3,775,648 $ 7,011,917 18 $ $ 714,123 $ 1,965,601 $ 16,240,599 $ $ 2,314,285 $ 11,246,590 $ 3,936,306 $ 7,310,283 19 $ $ 728,406 $ 1,965,601 $ 16,727,816 $ $ 2,314,285 $ 11,719,525 $ 4,101,834 $ 7,617,692 20 $ $ 742,974 $ 1,965,601 $ 17,229,651 $ $ 2,314,285 $ 12,206,792 $ 4,272,377 $ 7,934,415

A: NPV with John Deere buying Wind Turbines from Third Party

0 1 $ 20,828,561 $ $ $ 876,667 $ $ 1,965,601 $ $ 9,825,829 $ $ 2,119,920 $ $ 2,314,285 $ (20,828,561) $ 2,549,357 $ $ 892,275 $ (20,828,561) $ 1,657,082

Year Fixed Cost (-) Variable Cost (-) Interest Cost (-) Revenue (+) Tax Credit (-) Depreciation (-) Taxable Income Taxes (-) Cash Flow Net Present Value to Deere

15,632,426

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EXHIBIT 21: PROJECTIONS

1 $ $ $ $ $ $ $ $ $ 876,667 1,829,974 9,825,829 2,119,920 2,154,599 2,844,669 995,634 1,849,035 $ $ $ $ $ $ $ $ $ 941,010 1,829,974 11,732,554 2,119,920 2,154,599 4,687,051 1,640,468 3,046,583 7 0 19,391,390 (19,391,390) (19,391,390) 18,686,656 2 $ $ 886,867 $ 1,829,974 $ 10,120,604 $ 2,119,920 $ 2,154,599 $ 3,129,244 $ 1,095,235 $ 2,034,009 3 $ $ 897,271 $ 1,829,974 $ 10,424,222 $ 2,119,920 $ 2,154,599 $ 3,422,458 $ 1,197,860 $ 2,224,598 4 $ $ 907,883 $ 1,829,974 $ 10,736,949 $ 2,119,920 $ 2,154,599 $ 3,724,573 $ 1,303,600 $ 2,420,972 5 $ $ 918,707 $ 1,829,974 $ 11,059,057 $ 2,119,920 $ 2,154,599 $ 4,035,857 $ 1,412,550 $ 2,623,307 6 $ $ 929,748 $ 1,829,974 $ 11,390,829 $ 2,119,920 $ 2,154,599 $ 4,356,588 $ 1,524,806 $ 2,831,782 8 $ $ 952,496 $ 1,829,974 $ 12,084,531 $ 2,119,920 $ 2,154,599 $ 5,027,541 $ 1,759,639 $ 3,267,902 9 $ $ 964,213 $ 1,829,974 $ 12,447,066 $ 2,119,920 $ 2,154,599 $ 5,378,360 $ 1,882,426 $ 3,495,934 10 $ $ 976,164 $ 1,829,974 $ 12,820,478 $ 2,119,920 $ 2,154,599 $ 5,739,821 $ 2,008,937 $ 3,730,884 11 $ $ 621,687 $ 1,829,974 $ 13,205,093 $ $ 2,154,599 $ 8,598,832 $ 3,009,591 $ 5,589,241 12 $ $ 634,121 $ 1,829,974 $ 13,601,246 $ $ 2,154,599 $ 8,982,551 $ 3,143,893 $ 5,838,658 13 $ $ 646,803 $ 1,829,974 $ 14,009,283 $ $ 2,154,599 $ 9,377,906 $ 3,282,267 $ 6,095,639 14 $ $ 659,739 $ 1,829,974 $ 14,429,561 $ $ 2,154,599 $ 9,785,249 $ 3,424,837 $ 6,360,412 15 $ $ 672,934 $ 1,829,974 $ 14,862,448 $ $ 2,154,599 $ 10,204,941 $ 3,571,729 $ 6,633,211 16 $ $ 686,393 $ 1,829,974 $ 15,308,322 $ $ 2,154,599 $ 10,637,356 $ 3,723,074 $ 6,914,281 17 $ $ 700,121 $ 1,829,974 $ 15,767,571 $ $ 2,154,599 $ 11,082,877 $ 3,879,007 $ 7,203,870 18 $ $ 714,123 $ 1,829,974 $ 16,240,599 $ $ 2,154,599 $ 11,541,902 $ 4,039,666 $ 7,502,236 19 $ $ 728,406 $ 1,829,974 $ 16,727,816 $ $ 2,154,599 $ 12,014,838 $ 4,205,193 $ 7,809,644 20 $ $ 742,974 $ 1,829,974 $ 17,229,651 $ $ 2,154,599 $ 12,502,104 $ 4,375,736 $ 8,126,368

$ $ $ $ $ $ $ $ $

Year Fixed Cost (-) Variable Cost (-) Interest Cost (-) Revenue (+) Tax Credit (-) Depreciation (-) Taxable Income Taxes (-) Cash Flow Net Present Value to John Deere

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Wind Farm NPV w/o turbines $15,632,426 w/ turbines $18,686,656 Difference

NPV/MW $ 284,226 $ 339,757 $ 55,531.44 19.54%

Discount Rate Risk Free Rate Debt Rate Debt Financing Return Market Beta

17.46% 4.38% 5.68% 26.60% 13.00% 2.01

The above table on the left summarizes the difference in NPV per MW between the two analyses. If John Deere produced its own turbines, it can expect about a 20% increase on its NPV per MW installed. The table on the right calculates the discount rate using the CAPM and information from the exhibit on wind turbine manufacturers to arrive at a discount rate for John Deere producing turbines on its own. The below tables project John Deeres NPV from producing wind turbines if the growth rates of the wind energy industry are used. Depending on the growth rate of the industry, and with a terminal growth rate of 15%, the NPV of the project are calculated. This data shows the lifetime value accrued to John Deere if it produced all its own turbines. This value can be used as floor for John Deere when considering acquiring a wind turbine manufacturer.
2010 25.1 $ 1,153,685 $ 982,216 37.9 $ 1,743,347 $ 1,484,239 67.7 $ 3,113,120 $ 2,650,426 2011 $ $ $ $ $ $ 28.9 1,326,737 961,667 46.5 2,138,506 1,550,066 95.1 4,373,193 3,169,848 $ $ $ $ $ $ 2012 33.2 1,525,748 941,548 57.0 2,623,234 1,618,813 133.6 6,143,296 3,791,064 2013 2014 2015+ 50.5 $ 2,320,472 $ 42,238,964 69.7 $ 3,204,205 $ 58,325,331 137.2 $ 6,311,044 $ 114,878,349

Dismal Growth 15%

MW FV PV Tempered Growth MW 23% FV PV Optimistic Growth MW 40% FV PV

38.2 43.9 $ 1,754,610 $ 2,017,801 $ 921,850 $ 902,564 70.0 85.8 $ 3,217,835 $ 3,947,211 $ 1,690,610 $ 1,765,590 187.7 263.6 $ 8,629,871 $ 12,122,917 $ 4,534,025 $ 5,422,588

NPV 2010-2014 NPV 2015+ NPV Total Dismal $ 4,709,844 $ 42,238,964 $ 46,948,808 Tempered $ 8,109,318 $ 58,325,331 $ 66,434,649 Optimistic $ 19,567,951 $ 114,878,349 $ 134,446,300

EXHIBIT 22: SENSITIVITY ANALYSIS

Discount Rate on Wind Farm 7.50% 10.00% 12.70% 15.00% $ 56 $ 51 $ 47 Growth Rate in 22.50% $ 80 $ 72 $ 66 Wind Industry 40.00% $ 162 $ 147 $ 134 NPV ($US M)
The utility industry tends to be very stable and subsequently has a low beta. Wind farms are a little more risky than the industry as a whole and therefore, a sensitivity analysis was performed to capture the value of producing turbines to John Deere if the wind farms were discounted at different rates. If the Discount on the Wind Farm NPV analyses is varied from a Beta of equity of .6 to 1.3 to 2.0, the above table captures the subsequent NPV for John Deere. A Beta of 2.0 corresponds to the wind turbine manufacturers and a Beta of 1.3 is in the middle of electric utilities and wind turbine manufacturers.

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EXHIBIT 23: LIMITATIONS AND CONSIDERSATION

Financial information. While we consider the quality of John Deeres financial statement to be strong, granularity in terms of regional operations and investments resulted in some analysis to take place at an aggregate level, specifically with respect to analysis pertaining to global operations and debt financing strategies. Operations. Analysis is primarily focused on operations within the Agriculture & Turf division. Although significant issues pertaining to the Construction & Forestry, Credit, and Other divisions were evaluated and considered, these elements of the business fell outside the scope of our analysis. Company insight. Our attempts to interview executives within the organization were fruitless. Thus, our analysis was limited to publically available information and our insights lack management perspective.

35