Staples Module 6 Presentation

1. Staples Module 6 Presentation Mary Astuno 12February 2013

2. Business Segments North American Commercial segment consists of the U.S. and Canadian business units that sell and deliver office products and services directly to businesses, including Staples Advantage and Quill.com. International Operations segment consists of businesses in 23 countries in Europe, Australia, South America and Asia] Reported negative NI of $210.7M for FY 2012

3. Capital Asset Pricing Model (CAPM) R(eq)=r(rf)+(β*(r(mkt)-r(rf)) R(eq)=expected return on equity in the firm R(rf)=risk-free rate R(mkt)=expected return on the market β= covariance of the return on equity of the firm with the market risk premium

4. CAPM R(rf)= 3.66% R(mkt)=10.52% β= 1.47 (Average Beta Estimates) β= 1.07 (Regression Beta) β= 1.165 (Bloomberg)

5. Regression

6. Regression-Return on SPLS

7. Regression-Return on S&P

8. Regression Summary

9. Beta Estimates

10. Betas

11. CAPM w/ Different Beta Thus, the cost of equity capital for investment is 13.76% with Average Beta, 11% with Regression Beta, and 11.65% with Bloomberg Beta

12. Bloomberg-SPLS

13. Bloomberg-WACC

14. After tax cost of debt

15. Cost of Debt Bloomberg WACC info: 1.3% Pretax Borrowing rate: -9.1% Thus, the Bloomberg cost of debt seems most appropriate

16. Cost of Enterprise Capital V(D)= book value of NFL=2843.7 million V(eq)=8,846 million (stock price of $13.43 at February 11, 2014 times 653.68 million shares) Implied V(ent)= $11,689.7 million (2843.7 million + 8,846 million)

17. Cost of Enterprise Capital 9.13% compares to 9.9 WACC obtained from Bloomberg

18. DCF with 9.13 WACC

19. DCF-10% WACC

20. The End Questions, comments?