Stress Testing Synergies

Columbia Business School 1

*Assumes that all synergies will be realized
P/E Multiple Discount Factor Tax Rate
10 12% 26%
14 13% 30%
15 14% 36%
18 15% 38%
20 16% 40%
Transaction Share Price 14.68
Shares Issued for transaction 1,446
Shares of HP outstanding 1,941
Total Shares Outstanding Combined Entity 3,387
TV
2002 2003 2004 2005 2006
Years 1 2 3 4 5
Total Synergies $2,000 $2,500 $2,500 $2,500 $2,500
Goldman Sachs value of synergies per share (range $4-$8) - With 10 to 14% discount rate / terminal
value calculated using Perpetual Growth Model

Solomon Brothers value of synergies per share (range $6-$7) - With 12.5 to 13.5% discount rate / terminal
value calculated using Exit Multiple
(Values In millions)
(Values In millions)
Stress Testing Synergies
Columbia Business School 2
*Assumes that all synergies will be realized
Tax rate / PE multiple

26% 30% 36% 38% 40%
10.0 4.66 4.41 4.03 3.90 3.78
14.0 5.90 5.58 5.10 4.94 4.78
15.0 6.21 5.87 5.37 5.20 5.04
18.0 7.14 6.75 6.18 5.98 5.79
20.0 7.76 7.34 6.71 6.50 6.29
Stress Testing Synergies
Columbia Business School 3
*Assumes that all synergies will be realized
Tax rate / Discount rate

26% 30% 36% 38% 40%
10% 5.02 4.75 4.34 4.21 4.07
11% 4.84 4.58 4.18 4.05 3.92
12% 4.66 4.41 4.03 3.90 3.78
14% 4.33 4.10 3.75 3.63 3.51
15% 4.18 3.95 3.62 3.50 3.39