Flexibility Analysis

AAA AA A BBB
Pretax Cost of Debt 5.51% 5.52% 5.70% 6.33%
EBIT Interest coverage (x) 23.4 13.3 6.3 3.9
Maximum Debt Capacity
EBIT Average $ 359.40 $ 359.40 $ 359.40 $ 359.40
Maximum Interest Implied $ 15.36 $ 27.02 $ 57.05 $ 92.15
Maximum Total Debt Implied $ 278.75 $ 489.54 $ 1,000.84 $ 1,455.83

Worst EBIT $ 200.00 $ 200.00 $ 200.00 $ 200.00

Maximum Interest Implied $ 8.55 $ 15.04 $ 31.75 $ 51.28
Maximum Total Debt Implied $ 155.12 $ 272.42 $ 556.95 $ 810.14
Unused Debt Capacity
Book Value of Existing Debt $ 161.50 $ 161.50 $ 161.50 $ 161.50
Maximum Debt Implied $ 278.75 $ 489.54 $ 1,000.84 $ 1,455.83
Unused Debt Capacity at Current Rating $ 117.25 $ 328.04 $ 839.34 $ 1,294.33
Capital Structure
Market Value $ 2,665.40 $ 2,665.36 $ 2,665.36 $ 2,665.36
Maximum Debt Implied $ 278.90 $ 489.54 $ 1,000.84 $ 1,455.83
Debt/ Market Capital 9.47% 15.52% 27.30% 35.33%
 BB B
9.01% 11.97% Exhibit 9
2.2 1.0 Exhibit 6

$ 359.40 $ 359.40 Average EBIT Exhibit 4

$ 163.36 $ 359.40 EBIT/ Ebit interest coverage
$ 1,813.14 $ 3,002.51 Interest/ Cost of Debt

$ 200.00 $ 200.00 Pg 486

$ 90.91 $ 200.00 EBIT/ Ebit interest coverage
$ 1,008.98 $ 1,670.84 Interest/ Cost of Debt

$ 161.50 $ 161.50 Exhibit 3 (Short+Long)

$ 1,813.14 $ 3,002.51
$ 1,651.64 $ 2,841.01 Max Debt-Book Value

$ 2,665.36 $ 2,665.36 Exhibit 1 (Price x Common Shares)

$ 1,813.14 $ 3,002.51
40.49% 52.97% Debt/ (Equity+Debt)
 Capital Costs by Ratings

AAA AA A BBB BB
Cost of debt 5.47% 5.50% 5.70% 6.30% 9.00%
Tax Rate 38% 38% 38% 38% 38%
After Tax Cost of Debt 3.39% 3.41% 3.53% 3.91% 5.58%
Debt Weight 9.47% 15.52% 27.30% 35.33% 40.49%

Cost of equity 10.25% 10.35% 10.50% 10.60% 12.00%

Equity Weight 90.53% 84.48% 72.70% 64.67% 59.51%

WACC 9.60% 9.27% 8.60% 8.24% 9.40%

 B
12.00% Exhibit 8
38%
7.44%
52.97% Flexibility Analysis

14.25% Exhibit 8
47.03% 1-Debt

10.64%