daniel.e.brooks@ttu.edu
michaeldearden@hotmail.com
Kara.m.walker@ttu.edu
Melj524@aol.com

2

Executive Summary
Investment Recommendaton:
SELL (due to overvaluation)
MGM MIRAGE (NYSE): MGG
Date: April 1, 2005
52 week price change
Revenue (2004)
Market Capitalization
Shares Outstanding
Dividend Yield
3-month Avg. Daily Trading Volume
Percent Institutional Ownership
Book Value per share (mrq)
ROE (2004)
ROA (2004)
Est. 5 year EPS growth rate
Cost of Capital Estimates
Ke Estimated
5-yr Beta
3-yr Beta
2-yr Beta
Published Beta
Kd
WACC (before tax)
39.61 - 79.60
4.71B
10.44 B
157,396,176
N/A
989,773
39.50%
19.88
14.66%
3.65%
1.77%
Beta
0.6992
0.1104
0.7479
0.71
5.15%
5.23%
Ke
5.45%
R^2
5.31% 0.1006
3.54% 0.0026
5.45% 0.0482
EPS Forecast for years end
EPS
Valuation Ratio Comparison
Trailing P/E
Forward P/E
Forward PEG
M/B
Ratio Based Valuations
Market Price at 4/1/05
Trailing P/E
Forward P/E
Forward PEG
Dividend Yield
M/B
Intrinsic Valuation
Discounted Dividends
Free Cash Flows
Residual Income
Abnormal Earnings Growth
Long-Run Residual Income Perpetuity
Ford Epic Valuation
* MGM Mirage
*Harrah’s Entertainment Inc
*Caesar’s Entertainment Inc
*MGM Mirage
* S&P 500
2004(A)
$2.42
2005(E)
$2.76
MGM Mirage
29.08
21.05
1.79
3.54
$70.38
$62.94
$78.29
$73.78
N/A
$60.44
N/A
$65.43
$34.15
$34.16
$69.20
$31.22
2006(E)
$2.78
Industry Average
26.01
23.44
1.88
3.04
2007(E)
$2.79
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We valued MGG as of April 1, 2005 with a recommendation of hold, without purchase. Upon calculations of intrinsic values, we have concluded that MGG stock is in fact worth $34.15. MGM Mirage acquired Mandalay Bay Resorts early this year, creating the largest resort-gaming company within the industry.
The industry of entertainment, including hotels, restaurants, gaming and casinos, is definitely involved in head on competition. It is an industry that is rapidly growing at a constant rate in different cities, states, as well as countries.
Some of the top competitors of MGM Mirage consist of Harrah’s Entertainment
Inc., Caesars Entertainment Inc., Mandalay Resort Group, the Las Vegas Sands
Corp., and the Industry as a whole. This industry, as it has been discovered, is very highly concentrated. The different companies in this industry have a high diversification of casinos owned throughout the United States, allowing them to generate high amounts of revenue. The degree of differentiation in this industry is relatively high because due to the uniformed services offered at each resort casino. A resort casino can distinguish itself from the other competitors through exceptional and reliable customer service, as shown by MGM Mirage.
Growth potential in the industry is based upon customer satisfaction and entertainment. Due to the highly concentrated field, expansion has taken on many forms. MGG recently acquired Mandalay Bay Resorts, other mergers within the industry include Harrah’s and Caesars’s Entertainment. The ability to meet demand is the main factor in producing substantial revenues to fund growth.
This meeting of demand will come from the differentiation of the companies within the industry. Along with the twelve partially and fully owned resorts, MGG has recently looked overseas to add to this diversification. MGG feels as though
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the wide variety of entertainment, gaming and services they offer achieves this high level of consumer demand.
At first glance, the debt-to-equity ratio and financial leverage of MGM
Mirage may be a reason for concern. The current debt-to-equity ratio for the company is $3.5(debt) to $1.00(equity). A main reason for this increased leverage is the financing of the recent acquisition of Mandalay Bay with debt.
The increasing risk of investment that will follow such a transaction is to be closely monitored.
The management team at MGM Mirage has extensive experience dealing in debt. In 1999, a similar acquisition was financed in a very similar manner.
Although the financials took a hit in the few years to follow, five years later in
2004, the company seemed healthier than ever. So to borrow money at a lower cost than that of debt is a practice well known at MGM Mirage.
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BLACKJACK, CRAPS, and SLOT-MACHINES are games synonymous with the Las Vegas gaming industry. Although true, the gaming industry is far more diverse than just “gambling,” and while analyzing MGM Mirage Inc, this could be no more apparent. MGM Mirage Inc. owns and operates 12 resort casinos and is invested in 50% of two other casinos. Their different casinos are located along the strip of Las Vegas, as well as other cities of Nevada. The company also owns and operates casinos in cities outside Nevada including Atlantic City, Biloxi,
Mississippi, Detroit, and Australia. Recently, the MGM Mirage has announced that they are going to be expanding new developments in Singapore by joining with CapitaLand, a large listed property company in Asia. They have also confirmed the development of a resort in the Chinese enclave of Macao as well as talks about expanding into the United Kingdom. On a more specific business front, target markets for this company stem from the cost penurious all the way up through the most extravagant of consumers. Due to the equivalence of the actual gaming, MGM must differentiate themselves on other levels such as: the resort atmosphere, customer service, special events and variety of quality services available to the consumer. The immense size of the company creates an economy of scale unmatched in the industry.
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16.7
0.63119
4.77
6.33
Industry
Mandalay Resort
Group
Caesars
Harrah's
MGM Mirage
7.53
Las Vegas Sands
Corp.
10.91
The industry of entertainment, including hotels, restaurants, gaming and casinos, is definitely involved in head on competition. It is an industry that is rapidly growing at a constant rate in different cities, states, as well as countries.
Some of the top competitors of MGM Mirage consist of Harrah’s Entertainment
Inc., Caesars Entertainment Inc., Mandalay Resort Group, the Las Vegas Sands
Corp., and the Industry as a whole. Since Mandalay Resort Group is one of the smaller corporations and competitors in the industry, MGM Mirage has proposed an offer to buyout Mandalay Resort Group which could increase annual revenues to $7.9 billion. In the past few months it has been confirmed that Harrah’s and
Caesars are merging together. This merger will allow them to generate more annual revenue then that of MGM Mirage even after they have bought out
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Mandalay Resort Group. The Las Vegas Sands Corp. owns the Venetian, which is a direct competitor of the Bellagio, a resort casino owned by MGM Mirage. Since the Las Vegas Sands Corp. only owns one major resort casino in Las Vegas, MGM
Mirage will be competing more with them internationally as Sands Corp is also expanding into Macao and the United Kingdom.
The switching costs for this industry are both high and low. When there are high switching costs it is based on how well a guest views the customer service, such as comps to upgraded rooms, free meals, and other included amenities. These comps distract the guests from going to other resort casinos hopefully resulting in come back customers. There are low switching costs involved due to the fact that the resort casinos are located in one central area.
This makes it easier for the customers to migrate from one resort casino to another. The resort casino industry has high exit barriers due to the difficultly and high cost when getting out of the business.
The threat of new entrants for this particular entertainment industry is very low. In order to develop a new investment, for example in Las Vegas, an extremely large amount of capital is necessary. MGM Mirage’s success and profitability is directly related to the riskiness and constraints of entering into the industry. With an economy of scale as enormous as the gaming and casino industry, new entrants must enter with a large capacity, facing the possibilities of the space not being utilized. Existing relationships between the firms and suppliers (International Gaming Technology) creates a barrier to new firms wanting to enter the industry. Some of the legal barriers include state regulation and liquor licensing, zoning and Nevada gaming commission.
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The threat of substitute products is low in this industry because the different resort casinos are not affected by the substitutions. For someone who does not have the time or money necessary when traveling to Las Vegas or overseas, there are a number of entertainment areas and services where the exciting pleasure of gambling remains available. Some of the most popular substitutes consist of playing the lottery, going to horse races, online casinos, and bookies. The lottery is probably the easiest and most convenient way for a person to participate in gambling. Since the gambling world is constrained to those 21 and older, the lottery is a way to pull in a younger crowd. Those that enjoy the thrilling environment of casinos would most likely find pleasure in going to the horse races. Online casinos are a readily available source for people that appreciate a wide variety of games. Finally, bookies are involved in a type of black market that deals with placing bets on different sporting events and teams.
The two main determinants of the bargaining power of buyers are price sensitivity and relative bargaining power. Both price sensitivity and relative bargaining power are low for this industry. Price sensitivity is going to be based solely on the prices of the hotels, not the casino, since the actual casino is not competing on price. The sensitivity of price to the buyer will be determined by the wealth and personal taste of the consumer. A wealthy consumer will often choose an expensive hotel when luxury and customer service are of high importance. On the contrary, if a consumer is there solely to enjoy the casinos, a cheaper hotel would be suitable. When it comes to the relative bargaining power of the buyer, negotiating a certain price with the actual hotel will be
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difficult to achieve. However, there are online discount websites, such as
Hotels.com, who can help lower the cost for the buyer.
In this industry, the suppliers to the hotels and casinos have a substantial amount of power. This is because the resort casinos can only choose from a small selection of suppliers. International Gaming Technology Inc. is one of the main manufactures and distributors to all the casinos where gaming is legal.
This company supplies the casinos with various computerized gaming machines and technology systems. Since the products needed to run the casinos are very crucial for this industry, MGM Mirage’s ability to negotiate with the supplier is limited.
MGM Mirage stands as the third largest gaming company in the industry.
Their portfolio includes some of the top ranked resorts and casinos in the United
States. MGM Mirage owns and operates six of the largest casinos on the Strip in
Las Vegas, and 50% ownership of the Monte Carlo Resort & Casino, also located on the Strip. In 2003, over 75% of their net revenues and operating income was generated by their wholly owned casinos and resorts on the Strip. MGM Mirage strives to be leading competitor in the gaming industry by creating a high quality atmosphere for a premium price. Luxurious accommodations and exquisite dinning are only a fraction of what one might experience when choosing MGM
Mirage.
Another strength of MGM Mirage includes the company’s ability and continuance to grow. EE&K Architects is currently master planning MGM Mirages new six billion, sixty-six acre, “Project CityCenter” located on the Las Vegas Strip.
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Considered the largest private development in the country, the project will entail creating a vertical city including retail, dinning, entertainment, as well as boutique hotels and residential buildings lining the streets. MGM expects completion of this massive project by 2010.
with their competitors due to their heavy concentration on the Las Vegas Strip.
This limits their ability to target more customers, unlike their largest competitors, who operate in more gaming markets. Also, guestroom, dinning and entertainment prices are higher than their competitors because MGM Mirage feels that the quality of their facilities and services are much higher than that of their competitors.
Finally, to some extent, MGM Mirage has competition within its own hotels and casinos for customers. For example, the Bellagio, MGM Grand Las
Vegas and The Mirage all compete for the same high-end customer.
MGM Mirage and CapitaLand (one of the largest listed property companies in Asia), have agreed to submit a joint concept proposal to the Singapore government for the development of an integrated entertainment/resort complex at Marina Bay in Singapore. Not only will this project allow MGM Mirage to gain foreign business relations, it will also give them a unique opportunity to showcase it’s expertise in this tourist sector.
MGM Mirage has also proposed $4.8 billion to acquire Mandalay Resort
Group which if completed, would create the world’s largest gaming company.
However, if Harrah’s completes its merger with Caesars, MGM-Mandalay would fall second to largest.
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The main threat for MGM Mirage is substitution of products and mergers of other companies within this industry.
Upon the acquisition of Mandalay Resort
Group, MGM Mirage now stands as the largest gaming corporation in the industry. However, Harrah’s has proposed a plan to merge with Caesars which upon completion puts them as the largest corporation in the gaming industry.
Substitution of products in the gaming industry is becoming more of a threat as technology increases. The online casinos have been attracting more and more customers by giving them everything involved within a casino at the click of a button. This market has expanded in tremendous rates because it allows one to gamble in the comfort of one’s home.
With the gaming industry targeting more markets, globalization might prove to be more of a threat than an advantage. MGM mirage has proposed a plan to the Singapore government for a high class casino/resort in Marina Bay.
This might prove to be a threat because of the weakness in the economies over seas. Also, due to the unrelenting competition in the United States, MGM Mirage isn’t the only gaming corporation targeting global economies.
MGM Mirage Inc., (denoted as MGG by the NYSE), maintains a competitive advantage by differentiating their hotel-gaming resorts from the competition. Differentiation may be achieved by offering a wide variety of services to consumers, providing superior product quality and outstanding customer service. Although MGM Mirage’s prices may be slightly above that of competition, they ensure that the quality of their services are well deserving of the increased price. MGM Mirage carries a reputation for premiere services and this alone is a valuable asset. When one’s name becomes synonymous with quality, trust and diversity, the intrinsic value of the company’s name is greatly
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benefited. These aspects are essential to creating and maintaining a competitive advantage in the marketplace. As a leader in the hotel and gaming industry,
MGM Mirage does not stray far from these core competencies.
In the company’s mission statement, it states, “Our mission is to design and operate an unmatched collection of resort-casinos and provide unsurpassed service and amenities to our guests.”(mgmmirage.com). MGM Mirage achieves this mission by providing a wide variety of premium services to a diverse public.
These services range from, a family based atmosphere at Treasure Island, to a more luxurious atmosphere, such as that of Bellagio. The provided choices give consumers many ways to personalize their stay with MGM Mirage.
To ensuring long-term relationships with customers, MGM Mirage competes within itself to promote “internal competition.” The main goal of this internal competition is provide services at all life-stages of the consumer. MGM Mirage’s options are designed in a way appealing to consumers of all walks of life, from family on a tighter budget, to the family who may spend more generously. By ensuring these long-term relationships and creating loyal consumer support,
MGM Mirage is securing “customers for life”.
In this section qualitative and quantitative evaluations were performed.
The qualitative measures consist of the following six steps: (1) Identify key accounting policies, (2) Asses accounting flexibility, (3) Evaluate accounting strategy. (4) Evaluate the quality of disclosure, (5) Identify potential red flags, and (6) Undo accounting distortions. The quantitative measures that must be examined are the sales and core expense manipulations to analyze past performance as well as provide a benchmark to their competitors.
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The key accounting policies for MGM Mirage are based on their competitive strategies determined by cost leadership and differentiation. This information helps establish the key success factors and risks of the company.
Stated below are the evaluations of the policies and estimates used by MGM
Mirage.
♦ Revenue Recognition and Promotional Allowances:
The Casino revenue for MGM Mirage is the combination of the gaming wins and losses. Funds that are deposited by customers before gaming occurs and chips in the customer’s possession are recognized as liabilities. Revenue recognition is recorded when the services (hotels, food and beverage, entertainment and other operating revenues) are performed. There are accrued liabilities on advanced ticket sales and room deposits until services have been provided to customers. Emerging Issues Task Force requires that incentives on sales from MGM’s Players Club, be recorded as a reduction of Casino revenue.
♦ Accounts Receivable and Credit Risk:
MGM Mirage’s casino accounts receivables are based on the concentration of credit risk. MGM issues markers (loans) to customers based on the reliability of their credit history. Trade receivables (casino and hotel receivables) are usually non-interest bearing and recorded at cost. Management writes off an account when it is deemed to be uncollectible.
♦ Allowance for Doubtful Casino Accounts Receivable:
MGM Mirage’s casinos Bellagio, The Mirage, and MGM Grand partake in a significant portion of marker players. For these certain casinos, MGM sustains strict control by aggressively pursuing
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collection from customers who fail to pay. If marker play is insignificant to a casino, then MGM applies a standard aging method to the allowance for doubtful accounts.
♦ Inventories:
Inventories for MGM Mirage are stated at the lower of cost or market. The first-in, first-out (FIFO) method is used to determine the cost of inventory.
♦ Property and Equipment:
Property and equipment for MGM Mirage are stated at cost. The evaluation of property and equipment and other long-lived assets for impairment are in compliance with the Statement of Financial
Accounting Standard No. 144.
♦ Fixed Asset Capitalization and Depreciation:
MGM Mirage uses the straight-line method when determining the amount of depreciation and amortization. When developing and constructing a new project, interest costs are capitalized as part of the cost of the project as stated by the Statement of Financial
Accounting Standards No. 34. MGM does not borrow funds directly related to the project; therefore interest is capitalized on the project using weighted-average cost of their outstanding borrowings.
♦ Impairment of Long-lived Assets:
When dealing with asset disposal, MGM Mirage recognizes assets by fair market value or the lower of carrying value. The recognitions are based on estimates from comparable asset sales, solicited offers, or a discounted cash flow model. Long-lived assets are observed on a quarterly basis to determine if there are indications of potential impairments.
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♦ Goodwill and Other Intangible Assets:
On January 1, 2002, MGM Mirage utilized Statement of Financial
Accounting Standard No. 142. In compliance with this statement, goodwill and other intangible assets are reviewed for impairment annually and between test dates, instead of being amortized.
♦ Income Taxes:
MGM Mirage is obligated to income taxes in the United States and foreign jurisdictions where operations occur. They follow the
Statement of Financial Accounting Standards No.109 to recognize deferred tax assets.
♦ Market Risk:
MGM Mirage’s market risk is determined by the interest rate risk that relates to their long-term debts. MGM manages the mix of their long-term fixed rate borrowings and short-term borrowings through their bank credit facilities and commercial paper program.
When managed correctly, it will help to lower the exposure to interest rate risk.
♦ Classification of Gains and Losses as Extraordinary Items:
In April 2002, the Statement of Financial Accounting Standard No.
145 declared that extraordinary items (gains and losses) must meet the criteria of being both unusual and infrequent. MGM Mirage reclassified prior period losses as a component of income from continuing operations.
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♦ Cost Associated with Exit or Disposal Activities:
MGM Mirage adopted the Statement of Financial Accounting
Standard No. 146, which requires that activities associated with exit or disposal costs are recognized when incurred instead of at the date of commitment. This adoption had minimal effect on MGM
Mirage’s financial position due to the short amount of time between the commitment to exit and the cost incurred.
♦ Guarantee Obligations:
Interpretation No. 45 (FIN 45), issued by the FASB, requires that when a guarantee contract is in the beginning stage its future guarantee obligations must be acknowledged as liabilities. It is stated that FIN 45 has not had a relevant impact on MGM Mirage’s financial position.
The degree of flexibility for MGM Mirage is relatively high when making choices about their accounting policies and estimates. The most common policies used by firms with regards to flexibility consist of depreciation and amortization, inventory, revenue recognition, and the estimation of pension and other post-employment benefits. In addition to these policies, MGM Mirage exercised their flexibility by adopting other policies as of 2003. The adopted policies in 2003 were classification of gains and losses as extraordinary items, cost associated with exit or disposal accounts, and guarantee obligations. MGM’s judgment on these policies helps to benefit the company in the most profitable way.
MGM’s property and equipment is depreciated using the straight-line method. When determining income they include the disposition of gains and losses on these fixed assets. The amortization of good will and other long-lived
17

intangible assets is no longer in effect, because of the adoption of SFAS No. 142.
These assets are now reviewed for impairment on an annual basis and between test dates. MGM’s choice of accounting for inventory is prepared using the firstin, first-out method. By using the FIFO method, there is the potential to yield a higher net income. MGM uses accrual accounting, which recognizes revenues when earned. The two major accounts that apply to revenue recognition are advanced deposits and ticket sales. With the flexibility of these accounting policies, MGM is able to maintain a strong competitive advantage. MGM’s managers use this flexibility to assist in the assurance that their accounting numbers are transparent for outside perspectives.
MGM Mirage, being a resort-based (service) company, has revenues that are highly dependent on the number of customers at their resorts. Price is based upon having high volumes of customers, who will pay a competitive price for the room. Along with these revenues, a significant portion of MGM Mirage’s operating income is from the high-end gaming segment.
Through out MGM’s industry, most competitors implement very similar accounting policies. The homogenous accounting policies within the industry set a high standard of efficient bookkeeping. Over the past three years, there have been no discrepancies with financial disclosures accountants following the generally accepted accounting principles. MGM Mirage is very diligent in its accounting and strives to disclose accurate values. This was very evident on May
15, 2002, when the company dismissed Arthur Andersen LLP as their independent public accountant. One of the main reasons behind the dismissal of
Arthur Andersen LLP was the part they played in the Enron Scandal. Preceding the scandal, MGM Mirage hired Deloitte & Touche LLP to serve as their independent public accountant.
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As of February 22, 2004, Moody’s Investors Service, “cut MGM Mirage's debt ratings, citing the expectation that the company will finance its Mandalay
Resort Group acquisition with debt. Moody's cut MGM's senior secured and guaranteed debt ratings to "Ba2," which is two steps below investment grade, from "Ba1," with a stable outlook. The downgrade assumes that MGM's acquisition of Mandalay Resort Group will close in the first quarter of 2005 and will be financed with all debt.” (yahoo.reuters.com/financeQuoteCompanyNewsArticle).
A debt-rating cut can raise a company's borrowing costs, which may result in an increase in long-term debt. This increase may cause the company to receive less return on the debt and will be expensing the potential returns instead. The accounting strategies used by MGM Mirage seem to give a good financial picture of the way that business is conducted.
MGM Mirage, in its financial disclosures, seems to be vague in some aspects, and in turn, sufficient in others. As cited by management, “In 2002, our operating income increased 24%. A large factor in the increase was the significant one-time expenses incurred in 2001 in relation to the September 11,
2001 attacks, including restructuring charges and asset impairment charges.
Excluding the impact of these charges and pre-opening and start-up expenses, operating income increased 13%, largely due to stable payroll expenses as a result of restructuring activity in late 2001, and a significantly lower provision for doubtful accounts (MGM Mirage 10-K, 2003). This seems to be a very good explanation of the operations throughout MGM Mirage, but the wording seems to be un-informing. The numbers although disclosed, just seem to be not accounted for. Throughout the financials, the word restructuring, impairment, along with excluding expenses seem to be frequently used. Upon initial reading of the statements, the outlook seems bright, but these numbers are not easily
19

transferred to and from statements. Accordingly the numbers seem to be mere forecasts, that “puff-up” MGM Mirage’s business future. The accounting principles used are in accordance with the generally accepted accounting principles, and the numbers are accounted for, but the phrasing seems to be an attempt to usher attention to certain areas, while leaving other information not thoroughly discussed.
Upon review of the accounting analysis, a few potential “red flags” have indeed been uncovered. The first of which, deals with management’s ownership within the company. The total percentage of insider stock options reaches upward of 55.9%, leaving only 43.11% to institutions and the public. This alone doesn’t indicate much, but upon further review, many of the insiders (ex. CEO,
Chairman, CFO, etc…) have been exercising their stock options over the last two quarters in heavy concentration. Robert H. Baldwin, President and CEO of Mirage
Resorts, Inc. as of February 3 2005, planned a sale of stock options with estimated proceeds of $53,317,000. This specific example coupled with many other significant insider transactions, leads us to believe that some sort of market trend is expected to influence the industry. The fact that chief officers/insiders are liquidating stock options has two implications, one, the future acquisition of Mandalay Bay Resorts will have a material impact on the stock prices, or insiders may have undisclosed information regarding the future finances of MGM Mirage. Examples of transactions are listed below:
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*16-Feb-05
*16-Feb-05
15-Feb-05
15-Feb-05
BALDWIN, ROBERT H.
Officer
BALDWIN, ROBERT H.
Officer
BALDWIN, ROBERT H.
Officer
BALDWIN, ROBERT H.
Officer
8,400 Option Exercise at $34.15 per share.
8,400 Sale at $78.04 per share.
$286,860
$655,536
294,000 Option Exercise at $34.15 per share.
$10,040,100
294,000 Sale at $78.09 - $78.37 per share.
$23,000,000 2
14-Feb-05 BALDWIN, ROBERT H.
Officer
107,100 Option Exercise at $34.15 per share.
$3,657,465
$8,366,000 2 14-Feb-05 BALDWIN, ROBERT H.
Officer
107,100 Sale at $78.03 - $78.19 per share.
*FTC approved acquisition of Mandalay Bay on this very same day. http://finance.yahoo.com/g/it?s=MGG
One explanation of this sudden liquidation of stock may have something to do with the acquisition of Mandalay Bay Resorts. On February 16, 2005, the FTC indeed approved the acquisition of Mandalay Bay Resorts,
( http://biz.yahoo.com/ap/050216/mgm_mirage_mandalay_5.html
). The acquisition’s basic financial breakdown includes $4.8 billion in cash and $2.5 billion in debt (which was less than estimated by Moody’s). Our conclusions for why MGM Mirage’s chief officers are liquidating their stock options were to help finance the $4.8 billion in cash used in the acquisition of Mandalay Bay Resorts. However, this absence of information behind such dramatic stock liquidations signals a “red flag” to potential investors.
The latest financial data that has been released by MGM mirage is the quarterly reports for the year of 2004. During the year of 2004, the stock price of
MGM increased tremendously. Information of why this increase takes place is not easily found in the financial statements that have been disclosed. So, to further
21

analyze the increases we must obtain a copy of their 2004 10-K annual report
(when released), in which in-depth explanations should then be found.
After analyzing potential “red flags” to investment decisions, we conclude that MGM Mirage is a company in which we feel still needs some further analysis for investment purposes. The 2004 10-K annual report will provide more in-depth information and footnotes, and in these footnotes is where the disclosures should be found.
After analysis of the many financial statements of MGM Mirage, we have found almost no accounting distortions. MGM also has been in compliance with the generally accepted accounting principles for more than three years now with no discrepancy from accountants, leaving little if any distortions. The information provided allows us to create a balanced picture of the accounting practices, and financial well-being of the company.
Year
Net Sales/ Cash from Sales
1999 2000 2001 2002 2003
4.78 3.93 4.69 4.58 5.56
Net Sales/ Inventory
Net Sales/ Unearned Revenue *
Net Sales/ Warranty Liabilities *
90.95 37.21 47.82 55.77 59.96
N/A N/A N/A N/A N/A
N/A N/A N/A N/A N/A
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Asset Turnover
Changes in CFFO/ OI
0.51
N/A
0.30 0.36 0.36
1.69 (0.23) 0.22
0.36
2.80
Change in CFFO/ NOA N/A (1.26) (0.11) 0.49 (0.82)
Total Accruals/ Change in Sales N/A 0.310 1.084 9.770 4.799
Pension Expense/ SG&A * N/A N/A N/A N/A N/A
Other Employment Expense/ SG&A * N/A N/A N/A N/A N/A
* Indicates that these numbers where not relevant for MGM or were not
disclosed in their footnotes
Net Sales/Cash from Sales
12.00
10.00
8.00
6.00
4.00
2.00
MGM Mirage
Mandalay Bay
Harrahs
0.00
1999 2000 2001 2002 2003
Year
The ratio of net sales/cash from sales between the five years is growing at a steady rate. This shows that the amount of cash being received from sales is increasing relative to the increase in net sales from year to year. As compared to their competitors, it is apparent that MGM may not be collecting cash as efficiently.
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Net Sales/Net Accounts Receivable
50.00
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
MGM Mirage
Mandalay Bay
Harrahs
1999 2000 2001
Year
2002 2003
In the first two years net sales/net accounts receivable were not consistent with the last three years, which were increasing at a constant rate.
The Mirage acquisition that occurred in 2000 caused accounts receivable to almost triple in size. From years 2000 to 2001 it is apparent that accounts receivable decreased a significant amount. When comparing MGM to its competitors it is evident that Mandalay Bay and Harrah’s both have a smaller accounts receivable, making their ratio larger than MGM’s.
Net Sales/Inventory
100.00
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
MGM Mirage
Mandalay Bay
1999 2000 2001
Year
2002 2003
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From 1999 to 2000 inventories for MGM grew an incredible amount due to the Mirage acquisition
.
From 2000 on, the ratio increased at a steady rate due the constant amount of inventory held on hand. Harrah’s and the two years of
Mandalay Bay were not included in this comparison because their inventory was relatively small compared to the industry. Since this is a service industry, an increase in this ratio should not show signs of potential red flags.
Asset Turnover
0.70
0.60
0.50
0.40
0.30
MGM Mirage
Mandalay Bay
Harrahs
0.20
0.10
0.00
1999 2000 2001 2002 2003
Year
It is apparent that from 1999 to 2000 assets increased a vast amount causing the asset turnover ratio to decrease considerably. As of 2000 assets for
MGM increased slowly over the past few years. When benchmarking MGM their ratio is smaller, however, this shows that MGM has more assets relative to sales.
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Changes in CFFO/OI
3
2.5
2
1.5
1
0.5
0
-0.5
1999 2000 2001 2002 2003
MGM Mirage
Mandalay Bay
Harrahs
-1
-1.5
Year
The drop from 2000 to 2001 is caused by not generating as much cash from operations as they did in the previous year. After 2001, there is a significant increase in this ratio showing that the change between the years is not growing as fast as the change in CFFO. MGM is out performing their competitors as shown by the graph.
Changes in CFFO/NOA
20
15
10
5
0
-5
-10
-15
-20
1999 2000 2001 2002 2003
MGM Mirage
Mandalay Bay
Harrahs
Year
26

When analyzing this graph, it is evident that MGM is fairly stable throughout the five years. The negative numbers are due to either the change in CFFO or the change in NOA. The competitors’ numbers are more volatile which indicates they are not as efficient with their cash or working capital.
In conclusion, when comparing MGM to their competitors it is shown that they are performing just as well or better. As a whole it is clear that MGM has good accounting management indicating no room for potential red flags.
When evaluating a company’s financial statements, fourteen essential ratios should be taken into consideration. After computation of the ratios, a company’s overall capital structure, liquidity and profitability can be analyzed in detail. The ratios are calculated annually, and as a result may be analyzed for previous years and thus, forecasted into future years. Upon analyzing these ratios, important information is discovered, both in numerical form and key accounting principles.
Increases and decreases in ratios is to be expected, some of these changes may be trending or have some variation in values. The reasoning behind these variations is what needs careful evaluation. Explanations for these variations may be attributed to a large variation in other ratios, which may have a direct influence upon the other. On the other hand, variations may have been caused by a one-time or fluke situation in business transactions. Ratio Analysis is a transparent way to compare the capital structure, liquidity and profitability of an individual competitor or the industry as a whole. Also, the status of the market can be shown through ratios. This is evident in MGM Mirage’s ratios consistently through out late 2001, caused mainly by the tragic events of September 11,
2001. This had an ill-effect on travel, so in turn, hurt MGM Mirage as well as many hotel-gaming resorts, and this can be easily witnessed in ratios.
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Liquidity measures how easily, or quickly the assets of a company can be converted to cash. The first of the liquidity ratios is the current ratio, which is current assets over current liabilities, seems to show a trend of around .94, excluding extraneous years of 2000 thru 2002. This implies that for every dollar of current liabilities, MGM Mirage can cover $.94 with current assets. This seems to be a little low, but remember that MGM Mirage is classified in the service industry, in which .94 starts to sound more reasonable. This is mainly due to the fact that in the service industry substantial amounts of inventories are lacking.
Also accounts receivable is also lacking due to the fact that MGM Mirage produces most revenues through cash, or cash-like assets, instead of selling
“product” on account.
The quick asset ratio measures the most liquid assets against the company’s current liabilities. The formula equates to cash, or cash-like assets, less prepaid expenses and inventories, over current liabilities. Again the ratio shows that for every dollar of current liabilities, $.72 is available to compensate.
MGM Mirage currently has a quick ratio of .72, which correlates with the current ratio result, but here is even more affected by subtracting out inventories all together. Not only are we subtracting inventories, we are also subtracting prepaid expenses, which will decrease the ratio even more. Prepaid expenses and inventories account for more than half of MGM Mirage’s current assets, so it only makes sense that the quick asset ratio is smaller than one. The trend of this ratio follows closely to the current ratio and also shows declines in 2000-
2004, and now is regaining pre-September 11 th totals of around .765, which seems to be a foreseeable trend.
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The next segment of the liquidity analysis is the operating efficiency ratios, which measure how efficiently a company uses its assets compared to potential costs. The first of which is the accounts receivable turnover ratio, derived by calculating sales over accounts receivable. The resulting figure will show how many dollars of sales are attributed to one dollar of accounts receivable. Since 1999, MGM Mirage has had a stable growth of account receivable turnover. The ratio has climbed from 16.68 in 1999, to around 28 in
2004. This ratio has been able to increase steadily due to the fact MGM Mirage is very efficient at collecting accounts receivables. A main factor is the year to year increase in total revenues, and also MGM Mirage has been decreasing there accounts receivables, whether through collections or decreasing sales on account, both of which support operating efficiency. A variation of this ratio can give a number of days in which sales are outstanding, or the collection period.
This is calculated by dividing 365 into the accounts receivable turnover.
Currently the number of days that sales are outstanding (using 2003 actual ART) is 14 days (13.023days).
The inventory turnover ratio, which depicts how efficiently inventory is cycled through the capital system of a company, is calculated by dividing cost of goods sold by inventory. The higher the ratio reflects the more times that inventories can be replenished and turned over, thus increasing sales. When the sales increase so will the cost of goods sold, which will increase the ratio in proportion. MGM Mirage’s inventory turnover has steadily increased from 1999 to 2004, with a bad year in 2000, but has since continued to increase and now the ratio is totaling almost 33, which shows MGM Mirage turns over inventories
33 times per year. Although inventory turnover in the last 5 years has been lower than the competition, the rate at which the ratio has recently been increasing at a constant rate. This steady increase will soon bring MGM Mirage’s
29

inventory turnover up to competition, and if it continues, will soon surpass them.
This ratio also has an extension, which will calculate how long inventory is in holding. Calculated by dividing 365 by the inventory turnover ratio, MGM Mirage currently has a holding period of 12 days.
The last of the operating efficiency ratios is working capital turnover. This ratio is computed by taking sales and dividing it by working capital (CA-CL).
Working capital is used for determining the amount of sales per every dollar of working capital of the company. Thus, if a negative number results, like in the service industry, then more and more of sales have to be pumped into working capital to compensate for liabilities that assets cannot cover. This can be seen in the correlation between the sales growth from year to year and the working capital turnover. (Figure 1-1; following page) Although negative, this seems to be the industry norm, due to lack of current assets.
FIGURE 1-1
Actual Year End
Amount
Sales Growth
Working capital turnover
1999 2000
108.00% 131.61%
-68.7 -7.34
2001 2002 2003 2004
16.23% 1.62% 3.07%
8.42%
*a relationship can be seen between decreasing sales, when working capital turnover decreases
The first ratio that will be analyzed to show the overall profitability of
MGM Mirage is Gross Profit Margin. After computing gross profit margin, one can determine the percentage of profit stemming from sales. This shows how
30

effective the company produces profit from their sales. The ratio is derived from taking gross profit and dividing it by sales. MGM Mirage has had a trend over the last five years equally roughly 45%. This is just a touch below the industry average, but that may soon change. MGM Mirage will increase gross profit by being able to cover higher amounts of sales related expenses with additional revenues from the merger with Mandalay Bay. Sales, therefore will be increased, but not at the same rate, which will lead to an increased gross profit margin for
MGM Mirage.
The operating expense ratio for MGM Mirage will be calculated by taking operating expenses over sales. This computation will reveal how much of MGM
Mirage’s operating expenses are compensated with sales. In 1999, 32.45% was the operating expense ratio for the company with a steady decrease until 2003 when the ratio totaled 27.82%. This ratio is cause for some concern, seeing as it shows MGM Mirage covering less and less expenses with sales revenues. In
2004 and 2005, this ratio is forecasted to rise to 77.56% and 80.20% due to the increased sales revenue and additional costs associated with Mandalay Bay.
Net Profit Margin gives insight into the percentage of net income is produced by sales. This formula is computed by taking net income and dividing sales. An increase from year to year in this ratio shows net income affected positively by increased sales. This is very apparent in MGM Mirage’s net profit margin. Since 1999, the ratio has hovered around 5.75% to 6.5%, but in 2004 the net profit margin increased to 9.57%. This jump can again be attributed to the surplus of sales revenues generated by the merger. The ratio is expected to further increase in 2005 due to the efficiency of the merging companies will improve.
Asset Turnover reveals the relationship of sales that are produced per one dollar of total assets, simply sales over total assets. The ratio has been very consistent in the last five years for MGM Mirage. This consistency will soon
31

change due to the acquisition of assets through the buy-out of Mandalay Bay.
Mandalay Bay is also in the service industry, so the assets acquired will not be huge, but still will have a slight positive effect on the asset turnover ratio of MGM
Mirage. The effect of the increase raises a ratio of on average .36 (years 1999-
2004), to a forecasted .55 in year 2005. This ratio again shows positive signs for the company.
The overall profitability analysis of MGM Mirage, including ROA and ROE, seems to be increasing. The industry seems to be moving forward as well, but
MGM Mirage simply has a greater increase in their profitability ratios when taking into effect the merger with Mandalay Bay. MGM Mirage, shown through these ratios, is experiencing an increase of profits through operations acquisition of
Mandalay Bay. In conclusion, MGM Mirage is indeed a profitable company.
MGM Mirage has performed a debt to equity ratio that is increasingly high.
MGM is exposed to high credit risks to due to the fact that they are holding more debt than equity. In 1999 they were carrying a $1.95 of debt to every dollar of equity. In years 2000-2003 they carry roughly $3.50 of debt to every dollar of equity. In 1999 is when the acquisition occurred so it would be relevant to say that they are paying back there debt. In 2005, MGM will be buying out Mandalay
Bay Resorts and Casinos. This will increase this ratio even high because they will be acquiring Mandalay Bay’s liabilities, and therefore it will increase debt even further.
MGM Mirage’s times interest earned ratio is not steady and is increasing.
They are running at a low coverage, and not providing enough income from operations to cover their interest charges. If this is not changed, and if they keep with the trend they will have find other ways to cover their debt interest
32

expenses. This may lead to funding debt interest expenses through funds that would otherwise affect accounts such as retained earnings.
The debt service margin for MGM Mirage is not steady, but they are easing the pressure by using operating cash flows to service their long-term debt. In 2002 they generated $119.03 from cash provided by operations to service $1 of their long-term debt that will mature within the next year. In 2004, the debt service margin will decrease to the massive amount that was paid off in the previous years. In assumption, they are preparing for the debt that will be rendered in 2005 from the buy-out. MGM will have more long-term debt than cash from operations making the ratio decrease. It will take MGM a few years to accumulate enough cash from operations to payback their long-term debt.
Overall the capital structure of MGM Mirage looks to be fundamentally sound. Although the debt to equity ratio is increasing, the increased debt is planned to be compensated through returns being greater than the debt expense. MGM Mirage may take a hit on there expenses and debt may become very high, but in the future the decision to finance the merger with Mandalay
Bay, is a good decision. This is supported by 2000 capital structure ratios, which show another merger and has the same effects on capital structure. In conclusion, MGM Mirage has a bright future of returns and debt coverage; it will just take till around 2007 to start regaining pre-merger status of capital structure.
The following graphs give a visible representation of the ratios of MGM
Mirage as compared to major competitors, as well as the industry. Below each graph is a summary of the ratios significance.
33

Current Ratio
1.40
1.20
1.00
0.80
0.60
0.40
0.20
MGM
Mandalay
Harrah's
Caesars
Industry
0.00
1999 2000 2001 2002 2003 2004
Over the past five years, MGM Mirage has followed a level trend less than one for the current ratio. This is due to the fact that their liabilities have steadily increased above their current assets making them susceptible to short term liquidity problems.
Upon analysis of MGM’s competitors and the industries current ratio, it is apparent that their ratios are greater than one, meaning that these firms can cover their current liabilities from the cash realized on current assets.
Quick Asset Ratio
1.20
1.00
0.80
0.60
0.40
0.20
MGM
Mandalay
Harrah's
Caesars
Industry
0.00
1999 2000 2001 2002 2003 2004
MGM Mirages quick asset ratio follows a comparable trend to that of their current ratio, in that they are both less than one. Having a ratio of less than one, concludes a slower rate of paying of short-term liabilities. In spite of this, MGM’s quick asset ratio has slowly increased closer to the industry norm of 1.0. In relation to MGM, their competitors also have trends of quick assets ratios less than one.
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Accounts Reveicable Turnover
50.00
40.00
30.00
20.00
10.00
MGM
Mandalay
Harrah's
Caesars
Industry
0.00
1999 2000 2001 2002 2003 2004
Over the past five years, MGM’s accounts receivable turnover ratio has remained less than the industry norm. This is most likely due to increasing amounts of uncollected accounts receivable. MGM’s competitors are sustaining a faster turnover ratio due to cash being collected and reinvested quicker.
Inventory Tunover
120.00
100.00
80.00
60.00
40.00
MGM
Mandalay
Harrah's
Industry
20.00
0.00
1999 2000 2001 2002 2003 2004
MGM Mirages inventory turnover is considerably low as compared to their competitors and industry. MGM’s low ratio causes slower inventory cycles resulting in an increased cost of revenue. MGM’s data indicates from 2000-2004, a slow but steady increasing trend in inventory turnover. This increase allows MGM to cycle inventory at a faster rate, reducing the cost of revenue.
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Working Capital Turnover
300.00
200.00
100.00
0.00
(100.00)
(200.00)
(300.00)
(400.00)
(500.00)
(600.00)
MGM
Mandalay
Harrah's
Caesars
Industry
From 1999 to 2004, MGM’s current liabilities have exceeded their current assets causing the working capital ratio to be negative. This is due to the fact that MGM financed the acquisition of MGM Mirage(1999) through debt. This also shows that MGM, if needed, would have trouble liquidating some of their assets to pay of the debt.
Gross Profit Margin
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
MGM
Mandalay
Harrah's
Caesars
Industry
0.00%
1999 2000 2001 2002 2003 2004
Gross profit margin is generally influenced by two factors: 1.) the price premium that a firm’s products or services command within the market place and 2.) the efficiency of the firms procurement and production process. MGM’s trend has dropped minimally, but at a faster rate than their competitors. This rate was influenced heavily by the weak economy in 2001, and also the increasing price competition within the industry.
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Operating Expense Ratio
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
MGM
Mandalay
Harrah's
Caesars
Industry
1999 2000 2001 2002 2003 2004
MGM’s operating expense ratio has followed a rather similar trend when compared to the industry average. In 1999, MGM’s operating expense ratio was
30.01%, and has slowly decreased through 2000 to 2004. The operating expense ratio is decreasing because MGM maintains more sales per operating expenses. MGM has accomplished and been able to sustain this competitive advantage by operating more efficiently at lower costs while increasing sales.
Net Profit Margin
15.00%
10.00%
5.00%
0.00%
-5.00%
-10.00%
-15.00%
1999 2000 2001 2002 2003 2004
MGM
Mandalay
Harrah's
Caesars
Industry
-20.00%
The net profit margin ratio tells the percentage of sells retained by MGM through their net income. MGM is well above the industry and its competitors because they are gaining more return on their sales. MGM’s net profit margin trend is continuing to increase which clearly states they are more profitable than the industry.
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Asset Turnover
0.700
0.600
0.500
0.400
0.300
0.200
0.100
MGM
Mandalay
Harrah's
Caesars
Industry
0.000
1999 2000 2001 2002 2003 2004
The Asset turnover of a company measures the revenue productivity of resources employed. MGM Mirage’s asset turnover ratio provides that for every dollar of assets they produced, excluding 1999, only about .35 to .38 cents of sales. The big drop from
1999 to 2000 is because of the acquisition of Mirage, causing MGM’s total assets to nearly quadruple in size. MGM falls below its competitors and the industry average, but this shows that MGM has more assets relative to sales and that the two together are growing at a stable rate.
Return On Assets
6.00%
4.00%
2.00%
0.00%
-2.00%
-4.00%
1999 2000 2001 2002 2003 2004
MGM
Mandalay
Harrah's
Caesars
Industry
-6.00%
-8.00%
-10.00%
The return on asset ratio for MGM Mirage is relatively low, but falls above the industry average. This implies that MGM is getting a higher return of their assets than that of some of their competitors. There is a significant relationship between return on assets and asset turnover. As the return on asset ratio is increasing from 2000 to 2004, the asset turnover ratio is increasing as well.
38

Return on Equity
30.00%
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
1999 2000 2001 2002 2003 2004
MGM
Mandalay
Harrah's
Caesars
Industry
-40.00%
Return on equity is influenced by asset turnover and the relationship between total debt and owner’s equity. Since MGM will be increasing its assets with debt financing in the Mandalay acquisition, then their owner’s equity will represent a smaller percentage of total resources. This indicates that as profits increase for MGM their return on owners’ equity will also increase, as proven by there numbers. As a whole
MGM’s ratios are above the industry average which indicates that MGM has more debt relative to equity and finances more of their assets through debt
Debt to Equity Ratio
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
MGM
Mandalay
Harrah's
Caesars
Industry
1999 2000 2001 2002 2003 2004
As shown by MGM Mirage’s debt to equity ratio, there is a higher amount of dollars toward debt financing relative to each dollar invested by their shareholders. On average the ratio provides that for every $1.00 of owners’ equity, MGM has $3.50 of
39

liabilities. This could cause credit risk in the possibility that debt repayment cannot be satisfied with available cash flows. MGM’s debt to equity ratios fall above those of their competitors and the industry average, meaning that debt for MGM is a larger proportion of total financing.
A series of forecasted financial statements follow giving valuation to MGM
Mirage in a variety of ways. Forecasts were determined by considering the last five years, starting with year the ended 1999 through year ended 2004. Starting with 2005, numbers have been forecasted based on trends, and or interpretations of future gains or losses, these trends have been used to forecast the next ten years, ending with year end 2014.
The processes used to forecast data weighed heavily upon the year of
1999. During that year, MGM Mirage acquired a company very similar to
Mandalay Bay. We saw a trend over the five years following, in which “red flag” financials leveled off to more “comfortable” numbers. Included in our processes was the tendency of values to rebound to previous proportions. This proved to be very efficient, which is shown extensively throughout the forecasted data.
ƒ
- were calculated by increasing them by five percent. This was done because we are acquiring Mandalay Bay and a moving average was not required when making final calculations.
ƒ
were increased due to the amount of debt that MGM acquired.
40

ƒ
-was increased also due to the acquisition.
In the later years of the forecasted retained earnings the number is larger and not making the balance sheet balance. We believe that
MGM will be paying a special one time dividend, and decrease total stockholder’s equity.
ƒ
- forecasted projections show an increase in revenues.
A simple moving average was first projected then, after 2008 we cut the average, due to revenues being un-realistically large
ƒ
an increase was forecasted to occur at a rate determined by that of the average five previous years of cost associated with revenues. The findings were consistent with the ratio of revenues to costs for previous years.
ƒ
Initial forecasts were started at 2004, due to the lack of current 10-K MGM Mirage. The data seemed to be increasingly larger and larger and un-realistic. After checking our moving averages, again and again, we were finally presented the actual 2004 data, which along with our increments of the ratio, forecasted net income, which we find to be very feasible
ƒ
Basic walking averages were used as increasing multiples, with significant increases due to the
Mandalay Bay transaction occurring in cash from operations and increased depreciation due to acquiring a large amount of assets
41

ƒ
We observed the cash flows from previous acquisitions and based our forecasts upon this factual data of a situation. This shows to be a very realistic representation of future cash flows from investing activities
ƒ
The steady actual data seemed to be very consistent, so a walking average multiple was used to increase our forecasts. Many insider transactions swayed our decisions to increase the issuance of common stock. The fact that more stock was available to investors at a higher market price increased our forecasts from (2004) $89.8 billion to (2005-E)
$103.3 billion.
Although mere forecasts we at Abstract Financial firmly believe that the data presented is as close to actual data that can be valued. The fact that numbers do not lie and long-run trends are hard to stray from, gave us the utmost confidence in our forecasted values. Financial statements were transparent for the most part and the opaqueness was eventually decided upon based on financial fundamentals.
42

The purpose of the valuation analysis is to use the forecasted numbers to determine if MGM Mirage is fairly valued as a company. There are several models that can help establish the intrinsic value of the firm. The first model that was used was the Method of Comparables, which benchmarks MGM to its competitors. For the remaining models there was an additional evaluation to determine the cost of capital and Weighted Average Cost of Capital. The other three models used were the Free Cash Flow Model, Residual Income Model, and the Abnormal Earnings Growth Valuation Model.
Company
Trailing Price to Earnings Ratio
Symbol PPS EPS Trailing P/E
MGM Mirage MGG 70.38 2.42
29.08
Las Vegas Sands Corp.
MGM Mirage
LVS
Industry
Average P/E
26.01
42.86 1.51
Expected Share
Price
62.94
28.40
The trailing price to earnings ratio is a comparison of the price per share
(pps) to earnings per share (eps) of a company. The current years Net Income, dividends, and outstanding shares are used to derive the trailing P/E. An average of the competitors trailing P/E ratio was found to discover the expected share price of MGM. This expected share price that was found was $62.94.
43

When MGM’s actual price of $70.38 is compared to this models expected share price it shows that MGM is overvalued.
Company
MGM Mirage
Forward Price to Earnings Ratio
Symbol PPS EPS
MGG 70.38 3.34
Forward P/E
21.05
Las Vegas Sands Corp.
MGM Mirage
LVS 42.86 1.10
Industry
Average P/E
23.44
Expected Share
Price
78.29
38.96
The Forward P/E is obtained from the forecasted Net Income, dividends, and outstanding shares. Using the same steps as the trailing P/E ratio, an industry average P/E was found to acquire the expected share price of $78.29.
This model indicates that MGM is undervalued as compared to the actual price.
Company
MGM Mirage
Forward PEG Ratio
Symbol Forward P/E
MGG 21.05
1 YR. Ahead
E Growth
11.75% 1.79
Las Vegas Sands Corp.
MGM Mirage
LVS
Industry
Average PEG
1.88
38.96 16.30%
Expected Share
Price
73.78
2.39
44

The PEG ratio is a calculation of the forward P/E ratio and the earnings growth rate of one year ahead. By executing this ratio the price per share for
MGM Mirage is $73.78. This model provides that MGM is undervalued as a company when comparing this price to the actual of $70.38.
Company
MGM Mirage
Symbol
MGG
PPS
70.38
BPS P/B Ratio
19.88 3.54
Las Vegas Sands Corp.
MGM Mirage
LVS
Industry
Average P/B
3.04
42.86 3.57
Expected Share
Price
60.44
11.91
The market to book is a ratio of price per share to a company’s book value per share. To identify MGM’s expected share price, an industry average was established that excluded Las Vegas Sands Corp. The reason for this exclusion was because the P/B ratio for LVS did not match well with the other competitors.
The expected share price derived from this model was $60.44 implying that MGM is overvalued.
Once the comparable method ratios have been computed, it is observed that both the forward and trailing P/E ratios provide the most reasonable price per share as compared to the actual stock price of MGM.
When calculating the Altman Z-Score the number acquired for MGM is
1.05. This would imply that they are a high credit risk firm. MGM issues bonds to pay for the Mandalay Bay acquisition that are below investment grade. When
45

looking at the debt to equity ratio it shows that repayment of debt cannot be satisfied with available cash flows. To lessen their credit risk, MGM should improve their debt to equity ratio and be able to repay debt when due.
Finding WACC, Cost of Capital, and Cost of Debt:
The WACC, cost of capital, and cost of debt must be calculated in order to determine the estimated price per share of the remaining three models.
To find the cost of capital the CAPM equation was incorporated.
CAPM = R e
= R f
+
(R m
- R f
)
R e
= cost of equity
R f
= risk free rate
β = beta (systematic risk)
R m
= market risk free rate
MGM Mirage’s CAPM
R e
= .03207 + .7479(.03)
R e
= 5.45%
First the stock prices from the past five years, on a monthly basis, were taken from finance.yahoo.com. A regression model and slope of the firm’s return and the market risk premium was performed to get the R 2 and beta, respectively.
The risk free rate used was derived from the average monthly yield risk free rate from August 2003 through January 2005. This range of months is used because the economy was not stable before August 2003 due to the effects of 9/11 and the tech wreck.
The cost of debt was calculated by retrieving the long term debt located in the footnotes of the 10-K. A weighted average rate (7.27%) was established from the long-term debt that was transferred to the long-term liabilities of the balance sheet. For the long-term obligation portion a larger rate (8.27%) was
46

estimated because MGM Mirage does not disclose the rate at which they finance their retirement plans. An additional one percent was added because MGM is unionized making them a more risky company. The sum of the value weighted rate was computed to give the weighted average cost of debt (5.15%). (For further details see the appendix)
Finally the WACC is computed by:
WACC =
V d
V d
+ V e
(K d
) +
V d
V d
+ V e
(K e
)
V d
= Value of Debt
V e
= Value of Equity
K d
= Cost of Debt
K e
= Cost of Equity
WACC =
11,115,029,000 11,115,029,000
The value of debt is the total liabilities and the value of equity is the total stockholder’s equity. By solving this equation the WACC is 5.23%. This percent is used in the Discounted Cash Flow Model to determine the estimated price per share.
Sensitivity Analysis g
WACC 0.03 141.1 229.83 318.56 1028.4
0.04
0.0523
0.06
0.07
96.74
65.43 89.5 106.37 158.65
52.37 70.12 81.95 115.75
39.69 52.37 60.44 81.95
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The discounted cash flow model uses the forecasted operating and investing cash flows for the 10 forecasted years to obtain the free cash flows to the firm. Based on the sensitivity analysis that was used, the stock price of
$65.42 was derived using the calculated WACC, assuming no growth. By using different WACC percentages and growth rates this will manipulate the stock price to be closer to the actual of $70.38. The discounted cash flow model provides that with these assumptions MGM Mirage is overvalued as a company.
Sensitivity Analysis
0 0.01
g
0.04
0.0545
0.06
0.07
$41.20
$34.15 $34.14 $34.14 34.13
The residual income method is a tool used to estimate a company’s stock price. The factors taken into consideration are the cost of equity per share in relation to the company’s book value of equity per share. As discussed in earlier sections, we determined that MGM’s cost of equity is equal to 5.45%. In our model we assumed a zero growth rate to obtain an estimated stock price of
$34.15. As of April 1, 2005, the actual share price was valued at $70.38. This shows that MGM’s stock price is well overvalued using cost of equity equaling
5.45%. However, MGM is in the process of many growth opportunities that will influence the value per share. The acquisition of Mandalay Bay Resorts, which was primarily financed through debt, will have a direct effect of the cost of equity and therefore the stock value. As shown above, a decrease in the cost of equity, still assuming zero growth, will increase the estimated value of MGM’s stock. This increase is slowed by the fact growth in MGM is inevitable. In conclusion, the growth of MGM will have both positive and negative affects on
48

future share prices. However, the test of time will show if MGM has the ability to manage their financial leverage by keeping cost of liabilities under their return on investments.
Sensitivity Analysis
g
0.04
0.0545
0.06
0.07
$51.99
$34.16
$29.76
$23.66
$74.63
$51.81
$34.03
$29.65
$23.58
$74.49
$51.71
$33.97
$29.60
$23.53
$74.23
51.53
33.85
$29.49
$23.45
Under this approach the value of the firm’s equity is expressed as the sum of its book value and discounted forecasts of abnormal earnings. Recent research shows that abnormal earnings estimates of value outperform traditional multiples, such as price-earnings ratios, price-to-book ratios, and dividend yields, for predicting future stock movements. With this said, we calculated MGM’s value per share at $34.16. This value is relatively low when compared to its actual stock price of $70.38. Our calculations indicate MGM will have negative abnormal stock performance in the future, meaning that their stock price will continue to decrease. Although the near future will face these negative values, we firmly believe that MGM Mirage will not have negative abnormal earnings indefinitely.
This weighed heavily on our decision to slightly increase abnormal earnings growth from negative $0.14 to $0.0. By leveling off our abnormal earnings growth (AEG) to $0.0 we were able to forecast more precise stock prices. Had we used the negative (AEG) value, our stock’s estimated value would have plummeted to $4.86 which is simply unrealistic.
In conclusion, upon further evaluation of MGM Mirage we found a 12 month target price to be $34.15, when its actual market share price is $70.38.
With this said MGM is an overvalued company.
49

50

MGM MIRAGE 10-K: Balance Sheet
1999 2000
Actual at year end
2001 2002
2003
2004
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net
Inventories
Income tax receivable
Deferred income taxes
Prepaid expenses and other
Assets held for sale
Total current assets
Property and equipment, net
Other assets
Investment in unconsolidated affiliates
Excess of purchase price over fair market value of ne
Goodwill and other intangible assets, net
Deposits and other assets, net
Total other assets
Total Assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
Income taxes payable
Dividend Payable
Current obligation, capital lease
Current portion of long-term debt
Accrued interest on long-term debt
Other accrued liabilities
Liabilities related to assets held for sale
Total current liabilities
Deferred income taxes
Long-term debt
Other long-term obligations
Total Liabilities
Stockholders' equity
Common stock, $.01 par value:
authorized 300,000,000 shares, issued
166,393,025 and 163,685,876 shares;
outstanding 154,574,225 and
157,396,176 shares
Capital in excess of par value
Deferred compensation
Treasury stock, at cost (11,818,800
and 6,289,700 shares)
Retained earnings
Other comprehensive loss
Total stockholders' equity
Total Liabilities and Stockholder's equity
$121,522,000.00
$83,101,000.00
$15,240,000.00
$0.00
$17,452,000.00
$32,598,000.00
$0.00
$269,913,000.00
$2,384,772,000.00
$12,485,000.00
$31,683,000.00
$0.00
$44,601,000.00
$522,422,000.00
$54,281,000.00
$0.00
$298,021,000.00
$632,949,000.00
$0.00
$139,178,000.00
$171,744,000.00
$710,802,000.00
$0.00
$256,108,000.00
$185,801,000.00
$756,012,000.00
$0.00
$267,668,000.00
$247,070,000.00
$805,046,000.00
$0.00
$233,059,000.00
$278,784,000.00
$88,769,000.00
$874,724,000.00
$943,871,000.00
$1,152,711,000.00
$1,270,750,000.00
$1,316,889,000.00
$2,743,454,000.00
$10,734,601,000.00
$10,497,443,000.00
$10,504,985,000.00
$10,709,710,000.00
$10,898,830,000.00
$45,914,000.00
$3,296,000.00
$11,388,000.00
$5,145,000.00
$7,852,000.00
$18,915,000.00
$197,580,000.00
$0.00
$290,090,000.00
$108,713,000.00
$1,304,345,000.00
$4,241,000.00
$1,997,479,000.00
$1,384,000.00
$227,968,000.00
$236,650,000.00
$86,279,000.00
$11,264,000.00
$162,934,000.00
$70,549,000.00
$0.00
$795,644,000.00
$9,064,233,000.00
$65,317,000.00
$0.00
$0.00
$4,099,000.00
$521,308,000.00
$77,738,000.00
$564,743,000.00
$0.00
$1,233,205,000.00
$1,730,158,000.00
$5,348,320,000.00
$33,381,000.00
$9,578,269,000.00
$1,632,000.00
$208,971,000.00
$144,374,000.00
$78,037,000.00
$12,077,000.00
$148,845,000.00
$69,623,000.00
$0.00
$661,927,000.00
$8,891,645,000.00
$75,787,000.00
$0.00
$0.00
$0.00
$168,079,000.00
$78,938,000.00
$565,106,000.00
$0.00
$887,910,000.00
$1,746,272,000.00
$5,295,313,000.00
$57,248,000.00
$8,874,653,000.00
$1,637,000.00
$211,234,000.00
$139,935,000.00
$68,001,000.00
$0.00
$84,348,000.00
$86,311,000.00
$0.00
$589,829,000.00
$8,762,445,000.00
$69,959,000.00
$637,000.00
$0.00
$0.00
$6,956,000.00
$80,310,000.00
$592,206,000.00
$0.00
$750,068,000.00
$1,769,431,000.00
$5,213,778,000.00
$107,564,000.00
$8,590,909,000.00
$1,664,000.00
$178,047,000.00
$139,475,000.00
$65,189,000.00
$9,901,000.00
$49,286,000.00
$89,641,000.00
$226,082,000.00
$757,621,000.00
$8,681,339,000.00
$85,439,000.00
$0.00
$0.00
$0.00
$9,008,000.00
$87,711,000.00
$559,445,000.00
$23,456,000.00
$765,059,000.00
$1,765,426,000.00
$5,521,890,000.00
$123,547,000.00
$8,940,981,000.00
$1,683,000.00
$355,632,000.00
$172,408,000.00
$64,173,000.00
$0.00
$38,337,000.00
$88,651,000.00
$0.00
$719,201,000.00
$8,862,740,000.00
$101,584,000.00
$46,572,000.00
$0.00
$0.00
$14,000.00
$77,632,000.00
$557,681,000.00
$0.00
$783,483,000.00
$1,772,269,000.00
$5,569,768,000.00
$141,925,000.00
$9,050,928,000.00
$1,719,000.00
$1,261,625,000.00
$0.00
-$505,824,000.00
$2,041,820,000.00
$0.00
-$83,683,000.00
$2,049,841,000.00
$0.00
-$129,399,000.00
$2,125,626,000.00
-$27,034,000.00
-$317,432,000.00
$2,171,625,000.00
-$19,174,000.00
-$760,594,000.00
$2,284,353,000.00
-$12,947,000.00
-$1,110,228,000.00
$267,165,000.00
-$1,149,000.00
$427,956,000.00
-$5,280,000.00
$597,771,000.00
-$9,150,000.00
$890,206,000.00
-$8,886,000.00
$1,133,903,000.00
$6,345,000.00
$1,471,349,000.00
-$2,861,000.00
$1,023,201,000.00
$2,382,445,000.00
$2,510,700,000.00
$2,664,144,000.00
$2,533,788,000.00
$2,631,385,000.00
$2,743,454,000.00
$10,734,601,000.00
$10,497,443,000.00
$10,504,985,000.00
$10,709,710,000.00
$10,898,830,000.00
2005 2006 2007 2008
Forcast at year end
2009 2010 2011 2012 2013 2014
$368,164,725.90
$175,102,906.73
$64,569,747.41
$38,478,594.27
$89,759,137.50
$769,033,191.37
$10,302,242,357.35
$381,139,114.01
$177,839,937.51
$64,968,947.71
$38,978,815.99
$90,881,126.72
$822,318,168.96
$11,975,551,306.89
$847,552,428.80
$238,142,373.85
$284,303,923.20
$1,526,932,795.50
$12,598,208,344.23
$892,303,197.04
$243,336,623.87
$289,933,140.88
$1,770,478,576.38
$14,568,348,052.23
$394,570,728.84
$180,619,750.77
$65,370,616.04
$39,485,540.60
$92,017,140.80
$879,295,170.34
$13,920,642,140.74
$404,750,781.22
$183,878,505.19
$65,800,695.81
$39,998,852.63
$93,167,355.06
$942,082,389.24
$14,256,129,616.34
$415,193,482.24
$187,196,054.30
$66,233,605.12
$40,518,837.71
$94,331,947.00
$1,009,353,011.43
$14,599,702,340.09
$425,905,608.33
$190,573,458.86
$66,669,362.58
$41,045,582.60
$95,511,096.34
$1,081,427,180.17
$14,951,555,166.49
$939,416,805.84
$248,644,168.45
$295,673,817.07
$2,052,869,909.32
$16,852,807,220.40
$990,401,056.14
$252,125,800.76
$301,528,158.65
$2,380,302,659.85
$17,578,514,665.43
$1,044,152,335.68
$255,656,184.52
$307,498,416.19
$2,759,960,934.10
$18,369,016,285.61
$1,100,820,817.33
$259,236,002.37
$313,586,884.83
$3,200,174,703.09
$19,233,157,049.74
$436,894,110.74
$194,011,798.80
$67,107,986.94
$41,579,175.18
$96,704,985.04
$1,158,647,898.96
$15,311,887,646.00
$448,166,120.06
$197,512,173.51
$67,549,497.04
$42,119,704.45
$97,913,797.36
$1,241,382,663.93
$15,680,904,138.27
$1,160,564,824.18
$262,865,946.51
$319,795,905.15
$3,710,602,568.23
$20,181,138,113.19
$1,223,551,271.85
$266,546,718.83
$326,127,864.07
$4,302,443,677.86
$21,224,730,480.06
$459,728,950.86
$201,075,702.24
$67,993,911.89
$42,667,260.61
$99,137,719.82
$471,590,106.44
$204,703,524.40
$68,441,250.58
$43,221,935.00
$100,376,941.32
$1,330,025,212.75
$16,058,813,928.00
$1,424,997,398.42
$16,445,831,343.66
$1,289,956,134.84
$270,279,031.05
$332,585,195.78
$4,988,683,444.48
$22,377,522,585.23
$1,359,964,938.22
$274,063,604.85
$339,170,382.65
$5,784,378,453.87
$23,655,207,195.96
$102,781,145.14
$103,992,398.38
$105,217,925.97
$106,397,556.43
$107,590,412.09
$108,796,641.22
$110,016,393.75
$111,249,821.31
$112,497,077.20
$113,758,316.46
$14,014.00
$78,337,154.69
$594,104,732.86
$854,695,354.34
$1,905,189,175.00
$5,848,256,400.00
$144,284,014.23
$9,527,661,990.27
$1,959,660.00
$14,028.01
$79,081,357.66
$632,907,403.35
$946,575,104.93
$2,196,683,118.78
$6,140,669,220.00
$145,005,434.30
$10,244,928,065.42
$2,234,012.40
$14,042.04
$79,832,630.56
$674,244,386.66
$1,048,331,928.71
$2,532,775,635.95
$6,447,702,681.00
$145,730,461.47
$11,033,849,692.37
$2,546,774.14
$14,227.20
$80,591,040.55
$720,842,848.78
$14,414.80
$81,356,655.43
$770,661,829.64
$14,604.87
$82,129,543.66
$823,923,906.11
$1,161,027,611.05
$2,968,015,848.51
$6,770,087,815.05
$146,459,113.78
$11,953,436,061.35
$1,285,838,079.24
$3,478,049,122.07
$7,108,592,205.80
$147,191,409.35
$12,979,294,128.41
$1,424,065,672.76
$4,075,728,133.86
$7,464,021,816.09
$147,927,366.40
$14,126,607,684.96
$2,903,322.52
$3,309,787.67
$3,773,157.94
$14,797.44
$82,909,774.33
$880,867,037.85
$1,577,152,732.58
$4,776,114,206.02
$7,837,222,906.90
$148,667,003.23
$15,412,964,852.09
$4,301,400.05
$14,992.56
$83,697,417.18
$941,745,630.41
$1,746,696,651.33
$5,596,856,846.12
$8,229,084,052.24
$149,410,338.25
$16,858,755,749.40
$4,903,596.06
$15,190.25
$84,492,542.65
$1,006,831,671.85
$15,390.55
$85,295,221.80
$1,076,415,947.90
$1,934,466,541.35
$6,558,638,509.21
$8,640,538,254.85
$150,157,389.94
$18,487,637,177.29
$2,142,421,694.54
$7,685,695,789.12
$9,072,565,167.60
$150,908,176.89
$20,327,075,704.85
$5,590,099.51
$6,372,713.44
$2,368,417,190.40
-$1,168,181,901.60
$1,553,744,544.00
$3,070,546,353.95
$12,598,208,344.23
$2,455,574,943.01
-$1,229,160,996.86
$1,640,754,238.46
$4,323,419,986.81
$14,568,348,052.23
$2,545,940,100.91
-$1,293,323,200.90
$1,732,636,475.82
$5,818,957,528.03
$16,852,807,220.40
$2,639,630,696.62
-$1,360,834,671.99
$2,736,769,106.26
-$1,431,870,241.86
$1,829,664,118.46
$1,932,125,309.10
$5,625,078,604.07
$17,578,514,665.43
$5,389,722,157.20
$18,369,016,285.61
$2,837,482,209.37
-$1,506,613,868.49
$2,040,324,326.41
$5,106,549,364.78
$19,233,157,049.74
$2,941,901,554.67
-$1,585,259,112.42
$2,154,582,488.69
$4,768,173,261.10
$20,181,138,113.19
$3,050,163,531.89
-$1,668,009,638.09
$2,275,239,108.05
$4,365,974,730.66
$21,224,730,480.06
$3,162,409,549.86
-$1,755,079,741.20
$2,402,652,498.10
$3,278,786,221.29
-$1,846,694,903.69
$2,537,201,038.00
$3,889,885,407.94
$22,377,522,585.23
$3,328,131,491.11
$23,655,207,195.96
MGG-1
51

MGM MIRAGE 10-K: Proforma Balance Sheet
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net
Inventories
Income tax receivable
Deferred income taxes
Prepaid expenses and other
Assets held for sale
Total current assets
Property and equipment, net
Other assets
Investment in unconsolidated affiliates
Excess of purchase price over fair market value of ne
Goodwill and other intangible assets, net
Deposits and other assets, net
Total other assets total Non-Current Assets
Total Assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
Income taxes payable
Dividend Payable
Current obligation, capital lease
Current portion of long-term debt
Accrued interest on long-term debt
Other accrued liabilities
Liabilities related to assets held for sale
Total current liabilities
Deferred income taxes
Long-term debt
Other long-term obligations
Total long-term liabilities
Total Liabilities
Commitments and contingencies (Note 10)
Stockholders' equity
Common stock, $.01 par value:
authorized 300,000,000 shares, issued
166,393,025 and 163,685,876 shares;
outstanding 154,574,225 and
157,396,176 shares
Capital in excess of par value
Deferred compensation
Treasury stock, at cost (11,818,800
and 6,289,700 shares)
Retained earnings
Other comprehensive loss
Total stockholders' equity
1999
0.14%
2.30%
0.17%
0.57%
0.26%
0.39%
0.95%
9.89%
0.00%
14.52%
5.44%
65.30%
0.21%
70.95%
100.00%
4.43%
3.03%
0.56%
0.00%
0.64%
1.19%
0.00%
9.84%
86.93%
0.46%
1.15%
0.00%
1.63%
3.24%
90.16%
100.00%
123.30%
0.00%
-49.44%
26.11%
-0.11%
100.00%
2000
0.07%
85.70%
0.00%
-3.51%
17.96%
-0.22%
100.00%
2001 2002 2003 2004
0.07% 0.07%
2005 2006 2007
0.08% 0.08% 0.08%
2008 2009 2010 2011 2012 2013 2014
2.12%
2.20%
0.80%
0.10%
1.52%
0.66%
0.00%
7.41%
84.44%
4.87%
0.51%
0.00%
2.78%
8.15%
92.59%
100.00%
1.99%
1.38%
0.74%
0.12%
1.42%
0.66%
0.00%
6.31%
84.70%
6.03%
0.00%
1.33%
1.64%
8.99%
93.69%
100.00%
2.01%
1.33%
0.65%
0.00%
0.80%
0.82%
0.00%
5.61%
83.41%
1.66%
1.30%
0.61%
0.09%
0.46%
0.84%
2.11%
7.07%
81.06%
3.26%
1.58%
0.59%
0.00%
0.35%
0.81%
0.00%
6.60%
81.32%
6.77%
0.00%
2.44%
1.77%
10.97%
7.06%
0.00%
2.50%
2.31%
11.87%
7.39%
0.00%
2.14%
2.56%
12.08%
94.39% 92.93% 93.40%
100.00% 100.00% 100.00%
3.52%
1.56%
0.62%
0.00%
0.37%
0.85%
6.93%
83.76%
16.24%
5.28%
3.52%
1.56%
0.62%
0.00%
0.37%
0.85%
6.93%
83.76%
16.24%
5.28%
3.52%
1.56%
0.62%
0.00%
0.37%
0.85%
6.93%
83.76%
16.24%
5.28%
2.58%
1.80%
0.66%
0.05%
0.86%
0.83%
7.14%
83.64%
2.41%
5.43%
2.58%
1.80%
0.66%
0.05%
0.86%
0.83%
7.14%
83.64%
2.41%
5.43%
2.58%
1.80%
0.66%
0.05%
0.86%
0.83%
7.14%
83.64%
2.41%
5.43%
2.58%
1.80%
0.66%
0.05%
0.86%
0.83%
7.14%
83.64%
2.41%
5.43%
2.58%
1.80%
0.66%
0.05%
0.86%
0.83%
7.14%
83.64%
2.41%
5.43%
2.58%
1.80%
0.66%
0.05%
0.86%
0.83%
7.14%
83.64%
2.41%
5.43%
2.18%
1.98%
2.18%
1.98%
2.18%
1.98%
1.40%
2.11%
1.40%
2.11%
1.40%
2.11%
1.40%
2.11%
1.40%
2.11%
1.40%
2.11%
1.40%
2.11%
9.44% 9.44% 9.44% 9.22% 9.22% 9.22% 9.22% 9.22% 9.22% 9.22%
93.07% 93.07% 93.07% 92.86% 92.86% 92.86% 92.86% 92.86% 92.86% 92.86%
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
2.58%
1.80%
0.66%
0.05%
0.86%
0.83%
7.14%
83.64%
2.41%
5.43%
0.68%
0.00%
0.00%
0.04%
5.44%
0.81%
5.90%
0.00%
12.88%
18.06%
55.84%
0.35%
74.25%
100.00%
0.85%
0.00%
0.00%
0.00%
1.89%
0.89%
6.37%
0.00%
10.01%
19.68%
59.67%
0.65%
79.99%
100.00%
0.81%
0.01%
0.00%
0.00%
0.08%
0.93%
0.96%
0.00%
0.00%
0.00%
0.10%
0.98%
1.12%
0.51%
0.00%
0.00%
0.00%
0.86%
6.89%
0.00%
8.73%
20.60%
60.69%
1.25%
6.26%
0.26%
8.56%
19.75%
61.76%
1.38%
6.16%
0.00%
8.66%
19.58%
61.54%
1.57%
82.54% #REF!
82.69%
100.00% 100.00% 100.00%
1.18%
0.10%
0.91%
6.53%
1.18%
0.10%
0.91%
6.53%
1.18%
0.10%
0.91%
6.53%
1.12%
1.32%
0.90%
6.91%
1.12%
1.32%
0.90%
6.91%
1.12%
1.32%
0.90%
6.91%
1.12%
1.32%
0.90%
6.91%
1.12%
1.32%
0.90%
6.91%
1.12%
1.32%
0.90%
6.91%
1.12%
1.32%
0.90%
6.91%
9.09%
15.30%
62.77%
9.18%
15.30%
65.23%
9.18%
15.30%
65.23%
10.56%
17.18%
61.10%
10.56%
17.18%
61.10%
10.56%
17.18%
61.10%
10.56%
17.18%
61.10%
10.56%
17.18%
61.10%
10.56%
17.18%
61.10%
10.56%
17.18%
61.10%
1.66% 1.66% 1.66% 0.90% 0.90% 0.90% 0.90% 0.90% 0.90% 0.90%
79.73% 82.19% 82.19% 79.19% 79.19% 79.19% 79.19% 79.19% 79.19% 79.19%
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
0.07% 0.06%
81.64%
0.00%
-5.15%
23.81%
-0.36%
100.00%
79.79%
-1.01%
-11.91%
85.71%
-0.76%
86.81%
-0.49%
-30.02% -42.19%
33.41%
-0.33%
44.75%
0.25%
55.92%
-0.11%
100.00% 100.00% 100.00%
0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08%
90.49% 85.02% 84.91% 85.46% 86.40% 86.52% 86.47% 85.80% 85.92% 86.09%
-47.41% -46.73% -61.14% -79.80% -102.43% -126.57% -154.70% -190.46% -238.37% -297.44%
56.00% 37.95% 29.78% 32.53% 35.85% 39.96% 45.19% 52.11% 61.77% 76.23%
100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
MGG-2
52

MGM MIRAGE 10-K 2003-12-31: Income Statement
Revenues
Casino
Rooms
Food and beverage
Entertainment, retail and
other
Total Revenue
Less: Promotional
allowances
Net Revenue
Cost of Revenue
Casino
Rooms
Food and beverage
Entertainment, retail and other
Total Cost of Revenue
Gross Profit
Selling, General and Administrative Expenses
Corporate Expenses
General and administrative
Non recurring Expenses
Preopening and start-up
expenses
Restructuring costs
(credit)
Property transactions, net
Other Expenses
Depreciation and
amortization
Provision for doubtful
accounts
Write Downs and impairments
Total Expenses
Income from unconsolidated
affiliates
Operating Income
Non-operating income (expense)
Interest income
Interest expense, net
Non-operating items from
unconsolidated affiliates
Interest expense from unconsolidated
affiliate
Other, net
Income from continuing
operations before income taxes
Provision for income taxes
Income from continuing
operations
Discontinued operations
Income (loss) from
discontinued operations,
including loss on disposal
of $6,735 (2003)
Benefit (provision) for
income taxes
Income before exraordinary item and cumulative effect of change in accounting principle
Loss on early retirements of debt,
net of income tax benefits of $2,983 and $484
Cumulative effect of change in accounting principle
Preopening costs, net of income tax
benefit of $4,399
Net income
Basic income per share of common stock
Income from continuing
operations
Discontinued operations
Income before extraordinary item and
cumulative effect of change in accounting principle
Net income per share
Diluted income per share of common stock
Income from continuing
operations
Discontinued operations
Net income per share
$71,496,000
$0
$0
$126,610,000
$47,114,000
$0
$449,839,000
$0
$203,784,000
$2,142,000
($59,853,000)
$0
1999
$873,781,000
$266,490,000
$161,856,000
$196,626,000
$1,498,753,000
($112,606,000)
$1,386,147,000
$434,241,000
$84,135,000
$102,102,000
$112,046,000
$732,524,000
$653,623,000
$13,685,000
$190,934,000
($1,058,000)
($946,000)
($59,715,000)
$150,153,000
($55,029,000)
$95,124,000
$0
$0
$95,124,000
($898,000)
($8,168,000)
$86,058,000
$820
$0
$820
$740
$0
$720
2000
$1,913,733,000
$620,626,000
$490,981,000
$471,525,000
$3,496,865,000
($286,343,000)
Actual at year end
2001
$2,015,960,000
$793,321,000
$680,538,000
$620,523,000
$4,110,342,000
($378,706,000)
$3,210,522,000
$933,621,000
$188,080,000
$293,380,000
$291,711,000
$1,706,792,000
$1,503,730,000
$33,939,000
$422,655,000
$5,624,000
$23,520,000
$0
$293,181,000
$106,938,000
$102,225,000
$988,082,000
$0
$515,648,000
$12,964,000
($272,856,000)
$0
($2,043,000)
($741,000)
($262,676,000)
$275,040,000
($108,880,000)
$166,160,000
$3,731,636,000
$1,042,011,000
$216,548,000
$379,313,000
$410,125,000
$2,047,997,000
$1,683,639,000
$37,637,000
$552,916,000
$4,130,000
$23,382,000
$46,062,000
$375,945,000
$70,690,000
$0
$1,110,762,000
$36,816,000
$609,693,000
$5,630,000
($338,783,000)
($914,000)
$0
($6,036,000)
($340,103,000)
$269,590,000
($104,402,000)
$165,188,000
$14,141,000
($17,021,000)
$14,712,000
$384,890,000
$27,675,000
$0
$1,034,333,000
$32,361,000
$757,747,000
$4,306,000
($286,636,000)
($1,335,000)
2002
$2,042,626,000
$798,562,000
$711,373,000
$637,791,000
$4,190,352,000
($398,104,000)
$3,792,248,000
$1,019,761,000
$212,337,000
$396,273,000
$404,158,000
$2,032,529,000
$1,759,719,000
$43,856,000
$566,080,000
$0
($7,611,000)
($291,276,000)
$466,471,000
($171,271,000)
$295,200,000
$0 $6,803,000 ($661,000)
$3,965,000
$6,315,000
$7,093,000
$393,835,000
0
$1,085,269,000
0
$109,362,000
$975,907,000
$4,343,000
($367,504,000)
($25,519,000)
2004
$2,260,094,000
$925,227,000
$852,830,000
$683,038,000
$4,721,189,000
($429,396,000)
$4,291,793,000
$1,098,954,000
$246,461,000
$480,392,000
$448,650,000
$2,274,296,000
$2,017,497,000
$69,117,000
$604,944,000
0
($17,316,000)
($405,996,000)
$586,290,000
($214,180,000)
$372,110,000
$29,266,000
$6,597,000
($18,336,000)
$404,597,000
$12,570,000
$0
$1,087,390,000
$53,612,000
$713,069,000
$4,310,000
($341,114,000)
($10,401,000)
2003
$2,075,569,000
$835,938,000
$765,242,000
$647,710,000
$4,324,459,000
($415,643,000)
$3,908,816,000
$1,055,536,000
$236,050,000
$441,549,000
$428,834,000
$2,161,969,000
$1,746,847,000
$61,541,000
$591,155,000
$0
($12,160,000)
($359,365,000)
$353,704,000
($116,592,000)
$237,112,000
2005 2006
$3,537,047,110.00
$1,114,898,535.00
$1,023,396,000.00
$797,446,865.00
$3,890,751,821.00
$1,133,294,360.83
$1,042,840,524.00
$800,636,652.46
$5,311,337,625.00
($473,409,090.00)
$4,720,972,300.00
2007
$4,279,827,003.10
$1,151,993,717.78
$1,062,654,493.96
$803,839,199.07
$4,707,809,703.41
$1,171,001,614.12
$1,082,844,929.34
$807,054,555.87
$5,842,471,387.50
($521,933,521.73)
$6,426,718,526.25
($575,431,707.70)
$5,193,069,530.00
$5,712,376,483.00
$0.00
$70,209,889.23
$698,255,827.99
$438,645,788.11
$663,497,274.96
$402,843,887.83
2008
Forecast at year end
$7,069,390,378.88
($634,413,457.74)
$6,283,614,131.30
$1,373,692,500.00
$259,523,433.00
$529,872,376.00
$492,393,375.00
$2,655,481,684.00
$1,384,682,040.00
$259,782,956.43
$530,508,222.85
$493,624,358.44
$0.00
$1,395,759,496.32
$260,042,739.39
$531,144,832.72
$494,858,419.33
$1,406,925,572.29
$260,302,782.13
$531,782,206.52
$496,095,565.38
$0.00
$0.00
$70,153,755.00
$687,216,384.00
$430,855,490.00
$0.00
$70,181,816.50
$692,714,115.07
$434,733,189.41
$0.00
$70,237,973.18
$703,841,874.62
$442,593,600.21
2009
$5,178,590,673.75
$1,190,323,140.76
$1,103,418,983.00
$810,282,774.09
$7,776,329,416.76
($699,440,837.16)
$6,911,975,544.43
$1,418,180,976.87
$260,563,084.91
$532,420,345.17
$497,335,804.30
$0.00
$0.00
$70,266,068.37
$709,472,609.61
$446,576,942.61
2010
$5,696,449,741.13
$1,209,963,472.58
$1,124,383,943.68
$813,523,905.19
$8,553,962,358.44
($771,133,522.97)
$7,603,173,098.87
$1,429,526,424.68
$260,823,648.00
$533,059,249.58
$498,579,143.81
$0.00
$0.00
$70,294,174.80
$715,148,390.49
$450,596,135.09
2011
$6,266,094,715.24
$1,229,927,869.88
$1,145,747,238.61
$816,778,000.81
2012
$6,892,704,186.76
$1,250,221,679.73
$1,167,516,436.14
$820,045,112.81
2013
$7,581,974,605.44
$1,270,850,337.45
$1,189,699,248.43
$823,325,293.26
2014
$8,340,172,065.98
$1,291,819,368.01
$1,212,303,534.15
$826,618,594.43
$9,409,358,594.28
($850,174,709.07)
$10,350,294,453.71
($937,317,616.75)
$11,385,323,899.08
($1,033,392,672.47)
$12,523,856,288.99
($1,139,315,421.40)
$8,363,490,408.76
$1,440,962,636.08
$261,084,471.64
$533,698,920.68
$499,825,591.67
$0.00
$9,199,839,449.64
$1,452,490,337.17
$261,345,556.12
$534,339,359.38
$501,075,155.64
$0.00
$10,119,823,394.60
$1,464,110,259.87
$261,606,901.67
$534,980,566.62
$502,327,843.53
$0.00
$11,131,805,734.06
$1,475,823,141.95
$261,868,508.57
$535,622,543.30
$503,583,663.14
$0.00
$0.00
$70,322,292.47
$720,869,577.61
$0.00
$70,350,421.39
$726,636,534.24
$0.00
$70,378,561.56
$732,449,626.51
$0.00
$70,406,712.98
$738,309,223.52
$454,651,500.31
$1,367,438,940.00
$1,408,462,108.20
$1,450,715,971.45
$1,494,237,450.59
$1,539,064,574.11
$112,314,774.00
$1,200,365,610.00
$112,764,033.10
$1,228,334,128.71
$113,215,089.23
$113,667,949.59
$1,256,954,313.91
$1,286,241,349.43
$114,122,621.38
$1,316,210,772.87
$1,585,236,511.33
$114,579,111.87
$1,346,878,483.88
$1,632,793,606.67
$115,037,428.32
$1,378,260,752.55
$660,455,685.00
$401,878,800.00
$661,974,733.08
$402,361,054.56
$665,023,318.69
$403,327,300.49
$666,552,872.33
$403,811,293.25
$668,085,943.93
$404,295,866.80
$669,622,541.60
$404,781,021.84
$458,743,363.81
$1,681,777,414.87
$115,497,578.03
$1,410,374,228.08
$1,732,230,737.32
$115,959,568.34
$1,443,235,947.60
$671,162,673.45
$405,266,759.07
$462,872,054.09
$672,706,347.60
$405,753,079.18
$467,037,902.57
$1,784,197,659.44
$116,423,406.62
$1,476,863,345.18
$674,253,572.20
$406,239,982.88
$6,031,000
$0
$166,160,000
($5,416,000)
$0
$160,744,000
$1,150
$0
$1,150
$1,110
$0
$1,090
($2,176,000)
$4,627,000
$0
$0
$169,815,000
$1,040
$30
$0
$1,070
$1,030
$30
$1,060
($2,104,000)
($2,765,000)
$0
$0
$292,435,000
$1,870
($20)
$0
$1,850
$1,850
($20)
$1,830
$554,000
$6,585,000
$0
$0
$243,697,000
$1,590
$50
$0
$1,640
$1,560
$50
$1,610
$412,332,000 $435,628,758.00
$437,153,458.65
$438,683,495.76
$440,218,887.99
$441,759,654.10
$443,305,812.89
$444,857,383.24
$446,414,384.08
MGG-3
53
$447,976,834.42
$449,544,753.34

MGM MIRAGE 10-K 2003-12-31: Income Statement (Proforma)
Revenues
Casino
Rooms
Food and beverage
Entertainment, retail and other
Total Revenue
Less: Promotional allowances
Net Revenue
Cost of Revenue
Casino
Rooms
Food and beverage
Entertainment, retail and other
Total Cost of Revenue
Gross Profit
Selling, General and Administrative Expenses
Corporate Expenses
General and administrative
Non recurring Expenses
Preopening and start-up
expenses
Restructuring costs
(credit)
Property transactions, net
Other Expenses
Depreciation and
amortization
Provision for doubtful
accounts
Write Downs and impairments
Total Expenses
Income from unconsolidated
affiliates
Operating Income
Non-operating income (expense)
Interest income
Interest expense, net
Non-operating items from
unconsolidated affiliates
Interest expense from unconsolidated
affiliate
Other, net
Income from continuing
operations before income taxes
Provision for income taxes
Income from continuing
operations
Discontinued operations
Income (loss) from
discontinued operations,
including loss on disposal
of $6,735 (2003)
Benefit (provision) for
income taxes
Income before exraordinary item and cumulative effect of change in accounting principle
Loss on early retirements of debt,
net of income tax benefits of $2,983 and $484
Cumulative effect of change in accounting principle
Preopening costs, net of income tax
benefit of $4,399
Net income
1999
58.30%
17.78%
10.80%
13.12%
100.00%
-7.51%
92.49%
28.97%
5.61%
6.81%
7.48%
48.88%
43.61%
0.91%
12.74%
4.77%
0.00%
0.00%
8.45%
3.14%
0.00%
30.01%
0.00%
13.60%
0.14%
-3.99%
0.00%
-0.07%
-0.06%
-3.98%
10.02%
-3.67%
6.35%
0.00%
0.00%
6.35%
-0.06%
-0.54%
5.74%
Actual at year end
2000 2001 2002 2003 2004 2005 2006 2007
Forecast at year end
2008 2009 2010 2011 2012 2013 2014
54.73%
17.75%
14.04%
13.48%
100.00%
-8.19%
49.05%
19.30%
16.56%
15.10%
100.00%
-9.21%
48.75%
19.06%
16.98%
15.22%
100.00%
-9.50%
48.00%
19.33%
17.70%
14.98%
100.00% 100.00%
-9.61%
47.87% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%
19.60% 19.00% 19.00% 19.00% 19.00% 19.00% 19.00% 19.00% 19.00% 19.00% 19.00%
18.06% 16.47% 16.47% 16.47% 16.47% 16.47% 16.47% 16.47% 16.47% 16.47% 16.47%
14.47% 14.53% 14.53% 14.53% 14.53% 14.53% 14.53% 14.53% 14.53% 14.53% 14.53%
100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
-9.10%
91.81% 90.79% 90.50% 90.39% 90.90%
1.72%
0.00%
27.02%
0.90%
14.83%
0.14%
-8.24%
-0.02%
0.00%
-0.15%
-8.27%
6.56%
-2.54%
4.02%
25.35%
5.27%
9.23%
9.98%
49.83%
40.96%
0.92%
13.45%
0.10%
0.57%
1.12%
9.15%
3.06%
2.92%
28.26%
0.00%
14.75%
0.37%
-7.80%
0.00%
-0.06%
-0.02%
-7.51%
7.87%
-3.11%
4.75%
26.70%
5.38%
8.39%
8.34%
48.81%
43.00%
0.97%
12.09%
0.16%
0.67%
0.00%
8.38%
0.66%
0.00%
24.68%
0.77%
18.08%
0.10%
-6.84%
-0.03%
0.00%
-0.18%
-6.95%
11.13%
-4.09%
7.04%
24.34%
5.07%
9.46%
9.64%
48.50%
41.99%
1.05%
13.51%
0.34%
-0.41%
0.35%
9.19%
24.41%
5.46%
10.21%
9.92%
49.99%
40.39%
1.42%
13.67%
23.28% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%
5.22% 5.30% 5.30% 5.30% 5.30% 5.30% 5.30% 5.30% 5.30% 5.30% 5.30%
10.18% 10.30% 10.30% 10.30% 10.30% 10.30% 10.30% 10.30% 10.30% 10.30% 10.30%
9.50% 9.75% 9.75% 9.75% 9.75% 9.75% 9.75% 9.75% 9.75% 9.75% 9.75%
48.17% 49.70% 49.70% 49.70% 49.70% 49.70% 49.70% 49.70% 49.70% 49.70% 49.70%
42.73% 43.40% 43.40% 43.40% 43.40% 43.40% 43.40% 43.40% 43.40% 43.40% 43.40%
1.46% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%
12.81% 13.60% 13.60% 13.60% 13.60% 13.60% 13.60% 13.60% 13.60% 13.60% 13.60%
0.68%
0.15%
-0.42%
9.36%
0.08%
0.13%
0.15%
8.34% 9.40% 9.40% 9.40%
0.29%
0.00%
25.15%
1.24%
9.40% 9.40% 9.40% 9.40% 9.40% 9.40% 9.40%
0.00%
0.00%
22.99% 26.00% 26.00% 26.00% 26.00% 26.00% 26.00% 26.00% 26.00% 26.00% 26.00%
2.32% 2.70% 2.70% 2.70% 2.70% 2.70% 2.70% 2.70% 2.70% 2.70% 2.70%
16.49%
0.10%
-7.89%
-0.24%
20.67% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00% 23.00%
0.09%
-7.78%
-0.54%
0.00% 0.00%
-0.28%
-8.31%
8.18%
-2.70%
5.48%
-0.37%
-8.60%
12.42% 12.65% 12.65% 12.65% 12.65% 12.65% 12.65% 12.65% 12.65% 12.65% 12.65%
-4.54%
7.88% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
0.00%
0.00%
4.75%
-0.15%
0.00%
4.60%
0.17%
-0.05%
0.11%
0.00%
0.00%
4.13%
-0.02%
-0.05%
-0.07%
0.00%
0.14%
0.01%
0.15%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00% 0.00% 0.00%
6.98% 5.64%
MGG-4
8.73% 5.65% 5.65% 5.65% 5.65%
54
5.65% 5.65% 5.65% 5.65% 5.65% 5.65%

MGM MIRAGE 10-K : Cash Flow
1999
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of debt discount
and issuance costs
Provision for doubtful
accounts
Property transactions, net
Loss on early retirements of
debt
Cumulative effect of change in
accounting principle
Loss on disposal of
discontinued operations
Restructuring costs
Write-downs and impairments
Income from unconsolidated
affiliates
Distributions from
unconsolidated affiliates
Deferred income taxes
Tax benefit from stock option
exercises
Changes in assets and liabilities:
Accounts receivable
Inventories
Income taxes receivable and
payable
Prepaid expenses and other
Accounts payable and
accrued liabilities
Other
Net cash provided by
operating activities
Cash flows from investing activities
Purchases of property and
equipment
Acquisition of Primadonna Resorts,
Inc., net of cash acquired
Acquisition of Mirage Resorts,
Incorporated, net of cash acquired
Dispositions of property and
equipment
Investments in unconsolidated
affiliates
Change in construction payable
Other
Net cash used in
investing activities
Cash flows from financing activities
Net borrowing (repayment) under
bank credit facilities
Issuance of long-term debt
Retirements of debt
Repurchase of senior notes
Debt issuance costs
Repayments to banks and others
Issuance of common stock
Purchases of treasury stock
Sale of treasury stock
Other
Net cash used in
financing activities
Cash and cash equivalents
Net increase (decrease) for the
year
Cash related to discontinued
operations
Balance, beginning of year
Balance, end of year
Supplemental cash flow disclosures
Interest paid, net of amounts
capitalized
State, federal and foreign
income taxes paid
$86,058,000.00
$126,610,000.00
$1,958,000.00
$47,114,000.00
$0.00
$47,114,000.00
$12,567,000.00
$0.00
$0.00
$0.00
($5,026,000.00)
$0.00
$27,489,000.00
$0.00
($41,401,000.00)
($4,067,000.00)
($5,966,000.00)
($9,332,000.00)
$52,491,000.00
$0.00
$289,877,000.00
($375,260,000.00)
($13,346,000.00)
$0.00
$6,487,000.00
$0.00
($9,507,000.00)
$4,933,000.00
($386,693,000.00)
$963,000,000.00
$0.00
($374,500,000.00)
$0.00
$0.00
($206,955,000.00)
$50,072,000.00
($295,235,000.00)
$0.00
$0.00
$136,382,000.00
$39,566,000.00
$0.00
$81,956,000.00
$121,522,000.00
$56,035,000.00
$26,068,000.00
2000
$160,744,000.00
$293,181,000.00
$31,257,000.00
$106,938,000.00
$0.00
$106,938,000.00
$0.00
$0.00
$23,520,000.00
$102,225,000.00
($20,025,000.00)
$24,000,000.00
$35,595,000.00
$0.00
($122,203,000.00)
$4,293,000.00
($71,754,000.00)
($2,731,000.00)
$100,611,000.00
$0.00
$817,558,000.00
($336,499,000.00)
$0.00
($5,315,466,000.00)
$150,172,000.00
$0.00
($14,361,000.00)
($40,538,000.00)
($5,556,692,000.00)
$4,354,000,000.00
$1,547,052,000.00
$0.00
$0.00
($75,099,000.00)
($2,171,614,000.00)
$780,441,000.00
($52,579,000.00)
$474,720,000.00
$0.00
$4,845,580,000.00
$106,446,000.00
$0.00
$121,522,000.00
$227,968,000.00
$200,716,000.00
$30,537,000.00
Actual at year end
2001
$169,815,000.00
$390,726,000.00
$30,505,000.00
$71,244,000.00
$47,955,000.00
$1,197,000.00
$0.00
$0.00
$0.00
$0.00
($34,446,000.00)
$36,000,000.00
$65,619,000.00
$2,137,000.00
($23,726,000.00)
$7,464,000.00
($8,512,000.00)
$1,070,000.00
($5,528,000.00)
($3,089,000.00)
$795,883,000.00
($327,936,000.00)
$0.00
$0.00
$26,840,000.00
($38,250,000.00)
$3,368,000.00
($16,227,000.00)
($352,205,000.00)
($819,704,000.00)
$400,000,000.00
$0.00
$0.00
($8,529,000.00)
$0.00
$7,837,000.00
($45,716,000.00)
$0.00
$3,437,000.00
($462,675,000.00)
($18,997,000.00)
$0.00
$227,968,000.00
$208,971,000.00
$317,773,000.00
$19,342,000.00
2002
$292,435,000.00
$398,623,000.00
$28,527,000.00
$28,352,000.00
$14,712,000.00
$504,000.00
$0.00
$0.00
$0.00
$0.00
($31,765,000.00)
$37,000,000.00
$90,852,000.00
$18,050,000.00
($24,107,000.00)
($5,685,000.00)
$12,714,000.00
($16,142,000.00)
($18,863,000.00)
$2,751,000.00
$827,958,000.00
$412,937,000.00
$35,826,000.00
$13,668,000.00
($18,336,000.00)
$3,244,000.00
$0.00
$6,735,000.00
$0.00
$0.00
($43,211,000.00)
$38,000,000.00
$28,362,000.00
$9,505,000.00
($14,330,000.00)
($2,205,000.00)
($10,538,000.00)
($8,500,000.00)
$16,125,000.00
($8,013,000.00)
$702,966,000.00
$296,776,000.00
$23,382,000.00
($7,734,000.00)
$5,354,000.00
$5,527,000.00
$0.00
($82,538,000.00)
$0.00
$0.00
($65,876,000.00)
$41,500,000.00
$16,924,000.00
$22,943,000.00
($23,009,000.00)
($1,162,000.00)
$56,472,000.00
($5,880,000.00)
$1,406,000.00
($12,629,000.00)
$608,902,000.00
($526,483,000.00)
$345,730,000.00
$0.00
$14,996,000.00
($9,225,000.00)
$14,241,000.00
($13,304,000.00)
($174,045,000.00)
$1,145,710,003.20
($538,128,803.96)
$15,524,609.00
$1,202,995,503.36
($543,510,092.00)
$15,679,855.09
$1,263,145,278.53
($548,945,192.92)
$15,836,653.64
$1,326,302,542.45
($554,434,644.85)
$15,995,020.18
$1,392,617,669.58
($559,978,991.30)
$16,154,970.38
$1,462,248,553.06
($565,578,781.21)
$16,316,520.08
$1,535,360,980.71
($571,234,569.02)
$16,479,685.28
$1,612,129,029.74
($576,946,914.71)
$16,644,482.14
$1,692,735,481.23
($582,716,383.86)
$16,810,926.96
($270,126,000.00)
$0.00
$0.00
$0.00
($848,000.00)
$0.00
$45,985,000.00
($207,590,000.00)
$0.00
($21,906,000.00)
($454,485,000.00)
($285,087,000.00)
$600,000,000.00
$0.00
($28,011,000.00)
($25,374,000.00)
$0.00
$36,254,000.00
($442,864,000.00)
$0.00
($20,153,000.00)
($165,235,000.00)
($1,458,989,000.00) ($2,370,857,125.00)
$1,528,957,000.00
$0.00
($52,149,000.00)
($13,209,000.00)
$0.00
$89,821,000.00
($348,895,000.00)
$0.00
($2,808,000.00)
($257,272,000.00)
$1,536,601,785.00
($13,341,090.00)
$103,294,150.00
($352,035,055.00)
($3,369,600.00)
($1,461,906,978.00)
$2,304,902.68
($2,375,598,839.25)
$3,457.35
($1,464,830,791.96)
$5.19
($2,380,350,036.93) ($1,467,760,453.54)
$0.01
$0.00
($2,385,110,737.00) ($1,470,695,974.45)
$0.00
$0.00
($2,389,880,958.48) ($1,473,637,366.40)
$0.00
$0.00
($13,474,500.90)
$90,270,105.00
($355,203,370.50)
($3,088,800.00)
($13,609,245.91)
$103,810,620.75
($358,400,200.83)
($3,706,560.00)
($13,745,338.37)
$90,721,455.53
($361,625,802.64)
($3,397,680.00)
($13,882,791.75)
$104,329,673.85
($364,880,434.86)
($4,077,216.00)
($14,021,619.67)
$91,175,062.80
($368,164,358.77)
($3,737,448.00)
($14,161,835.87)
$104,851,322.22
($371,477,838.00)
($4,484,937.60)
($14,303,454.22)
$91,630,938.12
($374,821,138.55)
($4,111,192.80)
($14,446,488.77)
$105,375,578.83
($378,194,528.79)
($4,933,431.36)
($14,590,953.65)
$92,089,092.81
($381,598,279.55)
($4,522,312.08)
$2,263,000.00
$0.00
$208,971,000.00
$211,234,000.00
$266,071,000.00
$44,579,000.00
2003
$243,697,000.00
($300,039,000.00) ($550,232,000.00)
$0.00
$0.00
$20,340,000.00
($80,314,000.00)
$0.00
$0.00
$56,614,000.00
($41,350,000.00)
$6,313,000.00
($17,510,000.00)
($371,210,000.00)
$12,953,000.00
($33,673,000.00)
($555,688,000.00)
($17,957,000.00)
($15,230,000.00)
$211,234,000.00
$178,047,000.00
$308,198,000.00
$94,932,000.00
2004
$412,332,000
$177,585,000.00
$0.00
$178,047,000.00
$355,632,000.00
$267,517,000.00
$98,046,000.00
2005
$435,628,758.00
$457,035,040.00
$24,759,199.80
($7,778,857.20)
($70,816,700.00)
$43,628,950.00
$17,188,014.40
($23,538,207.00)
($1,176,525.00)
$57,595,792.80
($5,891,760.00)
$1,669,625.00
$1,091,152,384.00
($532,800,796.00)
$15,370,900.00
($14,383,410.00)
($13,570,080.00)
($339,387,750.00)
$186,464,250.00
$178,492,117.50
$357,765,792.00
$339,746,590.00
$108,831,060.00
2006
$437,153,458.65
$521,019,945.60
$25,501,975.79
($7,794,414.91)
($72,587,117.50)
$44,021,610.55
$17,222,390.43
($23,552,329.92)
($1,192,408.09)
$59,323,666.58
($5,915,327.04)
$1,670,292.85
$14,455,327.05
($15,605,592.00)
($347,872,443.75)
$182,024,625.00
$178,670,609.62
$358,481,323.58
$340,086,336.59
$108,939,891.06
2007
$438,683,495.76
$593,962,737.98
$26,267,035.07
($7,810,003.74)
($74,401,795.44)
$44,417,805.04
$17,256,835.21
($23,566,461.32)
($1,208,505.60)
$61,103,376.58
($5,938,988.35)
$1,670,960.97
$14,527,603.69
($17,946,430.80)
($356,569,254.84)
$191,125,856.25
$178,849,280.23
$359,198,286.23
$340,426,422.93
$109,048,830.95
2008
$440,218,887.99
$677,117,521.30
$27,055,046.12
($7,825,623.75)
($76,261,840.32)
$44,817,565.29
$17,291,348.88
($23,580,601.20)
($1,224,820.42)
$62,936,477.88
($5,962,744.30)
$1,671,629.35
$14,600,241.70
($20,638,395.42)
($365,483,486.21)
$186,575,240.63
$179,028,129.51
$359,916,682.80
$340,766,849.35
$109,157,879.78
Forecast at year end
2009
$441,759,654.10
$771,913,974.28
$27,866,697.50
($7,841,275.00)
($78,168,386.33)
$45,220,923.38
$17,325,931.58
($23,594,749.56)
($1,241,355.50)
$64,824,572.22
($5,986,595.28)
$1,672,298.00
$14,673,242.91
($23,734,154.73)
($374,620,573.37)
$195,904,002.66
$179,207,157.64
$360,636,516.17
$341,107,616.20
$109,267,037.66
2010
$443,305,812.89
$879,981,930.68
$28,702,698.43
($7,856,957.55)
($80,122,595.99)
$45,627,911.69
$17,360,583.44
($23,608,906.41)
($1,258,113.80)
$66,769,309.38
($6,010,541.66)
$1,672,966.92
$14,746,609.13
($27,294,277.94)
($383,986,087.70)
$191,239,621.64
$179,386,364.79
$361,357,789.20
$341,448,723.82
$109,376,304.70
2011
$444,857,383.24
$1,003,179,400.98
$29,563,779.38
($7,872,671.46)
($82,125,660.89)
$46,038,562.89
$17,395,304.61
($23,623,071.75)
($1,275,098.33)
$68,772,388.66
($6,034,583.83)
$1,673,636.11
$14,820,342.17
($31,388,419.63)
($393,585,739.90)
$200,801,602.72
$179,565,751.16
$362,080,504.78
$341,790,172.54
$109,485,681.00
2012
$446,414,384.08
$1,143,624,517.12
$30,450,692.76
($7,888,416.81)
($84,178,802.41)
$46,452,909.96
$17,430,095.22
($23,637,245.60)
($1,292,312.16)
$70,835,560.32
($6,058,722.16)
$1,674,305.56
$14,894,443.88
($36,096,682.58)
($403,425,383.39)
$196,020,612.18
$179,745,316.91
$362,804,665.79
$342,131,962.71
$109,595,166.69
2013
$447,976,834.42
$1,303,731,949.51
$31,364,213.55
($7,904,193.64)
($86,283,272.47)
$46,870,986.15
$17,464,955.41
($23,651,427.94)
($1,309,758.38)
$72,960,627.13
($6,082,957.05)
$1,674,975.29
$14,968,916.10
($41,511,184.97)
($413,511,017.98)
$205,821,642.79
$179,925,062.23
$363,530,275.12
$342,474,094.67
$109,704,761.85
2014
$449,544,753.34
$1,486,254,422.44
$32,305,139.95
($7,920,002.03)
($88,440,354.28)
$47,292,825.02
$17,499,885.32
($23,665,618.80)
($1,327,440.11)
$75,149,445.95
($6,107,288.88)
$1,675,645.28
$15,043,760.68
($47,737,862.71)
($423,848,793.43)
$200,921,127.49
$180,104,987.29
$364,257,335.67
$342,816,568.77
$109,814,466.61
MGG-5
55

MGM MIRAGE 10-K : Statement of Cash Flows (Proforma)
1999
$209,868,000
Actual at year end
2000
$537,716,000
2001
$609,693,000
2002
$757,747,000 Operating Income
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of debt discount
and issuance costs
Provision for doubtful
accounts
Property transactions, net
Loss on early retirements of
debt
Cumulative effect of change in
accounting principle
Loss on disposal of
discontinued operations
Restructuring costs
Write-downs and impairments
Income from unconsolidated
affiliates
Distributions from
unconsolidated affiliates
Deferred income taxes
Tax benefit from stock option
exercises
Changes in assets and liabilities:
Accounts receivable
Inventories
Income taxes receivable and
payable
Prepaid expenses and other
Accounts payable and
accrued liabilities
Other
Net cash provided by
operating activities
Cash flows from investing activities
Purchases of property and
equipment
Acquisition of Primadonna Resorts,
Inc., net of cash acquired
Acquisition of Mirage Resorts,
Incorporated, net of cash acquired
Dispositions of property and
equipment
Investments in unconsolidated
affiliates
Change in construction payable
Other
Net cash used in
investing activities
Cash flows from financing activities
Net borrowing (repayment) under
bank credit facilities
Issuance of long-term debt
Retirements of debt
Repurchase of senior notes
Debt issuance costs
Repayments to banks and others
Issuance of common stock
Purchases of treasury stock
Sale of treasury stock
Other
Net cash used in
financing activities
Cash and cash equivalents
Net increase (decrease) for the
year
Cash related to discontinued
operations
Balance, beginning of year
Balance, end of year
Supplemental cash flow disclosures
Interest paid, net of amounts
capitalized
State, federal and foreign
income taxes paid
Non-cash investing and financing transactions
Acquisition of Detroit
41.01%
60.33%
0.93%
22.45%
0.00%
22.45%
5.99%
0.00%
0.00%
0.00%
-2.39%
0.00%
13.10%
0.00%
-19.73%
-1.94%
-2.84%
-4.45%
25.01%
0.00%
138.12%
-1.79
-0.06
0.00
0.03
0.00
-0.05
0.02
-1.84
0.19
0.00
0.39
0.58
0.27
0.12
4.59
0.00
-1.78
0.00
0.00
-0.99
0.24
-1.41
0.00
0.00
0.65
0.00
29.89%
-22.73%
0.80%
-13.34%
-0.51%
18.71%
0.00%
152.04%
-0.63
0.00
-9.89
0.28
0.00
-0.03
-0.08
-10.33
54.52%
5.81%
19.89%
0.00%
19.89%
0.00%
0.00%
4.37%
19.01%
-3.72%
4.46%
6.62%
0.00%
0.20
0.00
0.23
0.42
0.37
0.06
8.10
2.88
0.00
0.00
-0.14
-4.04
1.45
-0.10
0.88
0.00
9.01
0.00
27.85%
-0.54
0.00
0.00
0.04
-0.06
0.01
-0.03
-0.58
64.09%
5.00%
11.69%
7.87%
0.20%
0.00%
0.00%
0.00%
0.00%
-5.65%
5.90%
10.76%
0.35%
-3.89%
1.22%
-1.40%
0.18%
-0.91%
-0.51%
130.54%
-0.03
0.00
0.37
0.34
0.52
0.03
-1.34
0.66
0.00
0.00
-0.01
0.00
0.01
-0.07
0.00
0.01
-0.76
0.00
38.59%
52.61%
3.76%
3.74%
1.94%
0.07%
0.00%
0.00%
0.00%
0.00%
-4.19%
4.88%
11.99%
2.38%
-3.18%
-0.75%
1.68%
-2.13%
-2.49%
0.36%
109.27%
0.00
0.00
0.28
0.28
0.35
0.06
-0.36
0.00
0.00
0.00
0.00
0.00
0.06
-0.27
0.00
-0.03
-0.60
-0.40
0.00
0.00
0.03
-0.11
0.01
-0.02
-0.49
2003
$713,069,000
2004
$975,907,000
34.18%
-2.01%
-0.31%
-1.48%
-1.19%
2.26%
-1.12%
98.58%
-0.77
0.00
0.00
0.08
-0.06
0.02
-0.05
-0.78
57.91%
5.02%
1.92%
-2.57%
0.45%
0.00%
0.94%
0.00%
0.00%
-6.06%
5.33%
3.98%
1.33%
-0.03
-0.02
0.30
0.25
0.43
0.13
-0.40
0.84
0.00
-0.04
-0.04
0.00
0.05
-0.62
0.00
-0.03
-0.23
42.25%
30.41%
2.40%
-0.79%
0.55%
0.00%
0.00%
-8.46%
0.00%
0.00%
-6.75%
4.25%
1.73%
2.35%
-2.36%
-0.12%
5.79%
-0.60%
0.14%
-1.29%
62.39%
0.18
0.00
0.18
0.36
0.27
0.10
-1.50
1.57
0.00
-0.05
-0.01
0.00
0.09
-0.36
0.00
0.00
-0.26
0.15
0.00
MGG-6
0.00
-0.54
0.35
0.00
0.02
-0.01
0.01
-0.01
-0.18
2005
54%
5.89%
-0.58%
-7.50%
5.13%
1.56%
2006
36.58% 36.58%
54%
5.89%
-0.58%
-7.50%
5.13%
1.56%
-2.30%
1.25%
1.99%
-0.20%
18.75%
-2.30%
1.25%
1.99%
-0.20%
18.75%
79.20% 79.20%
0.05
0
0.25
0.6
0.27
0.11
-1.2
0
0
0.025
0
-0.01
0.02
-0.95
6.25
0.5
0
0
-0.01
-1.1
0.15
-0.9
0
0
2
0
0.05
0
0.25
0.6
0.27
0.11
-1.2
0
0
0.025
0
-0.01
0.02
-0.95
6.25
0.5
0
0
-0.01
-1.1
0.15
-0.9
0
0
2
0
2007
36.58%
54%
5.89%
-0.58%
-7.50%
5.13%
1.56%
-2.30%
1.25%
1.99%
-0.20%
18.75%
79.20%
6.25
0.5
0
0
-0.01
-1.1
0.15
-0.9
0
0
2
0
0.05
0
0.25
0.6
0.27
0.11
-1.2
0
0
0.025
0
-0.01
0.02
-0.95
Forecast at year end
2008 2009 2010
36.58% 36.58%
54%
5.89%
-0.58%
-7.50%
5.13%
1.56%
-2.30%
1.25%
1.99%
-0.20%
18.75%
-2.30%
1.25%
1.99%
-0.20%
18.75%
79.20% 79.20%
-1.2
0
0
0.025
0
-0.01
0.02
-0.95
0.05
0
0.25
0.6
0.27
0.11
6.25
0.5
0
0
-0.01
-1.1
0.15
-0.9
0
0
2
0
54%
5.89%
-0.58%
-7.50%
5.13%
1.56%
-1.2
0
0
0.025
0
-0.01
0.02
-0.95
0.05
0
0.25
0.6
0.27
0.11
6.25
0.5
0
0
-0.01
-1.1
0.15
-0.9
0
0
2
0
36.58%
54%
5.89%
-0.58%
-7.50%
5.13%
1.56%
-2.30%
1.25%
1.99%
-0.20%
18.75%
79.20%
-1.2
0
0
0.025
0
-0.01
0.02
-0.95
0.05
0
0.25
0.6
0.27
0.11
6.25
0.5
0
0
-0.01
-1.1
0.15
-0.9
0
0
2
0
2011
54%
5.89%
-0.58%
-7.50%
5.13%
1.56%
2012
36.58% 36.58%
54%
5.89%
-0.58%
-7.50%
5.13%
1.56%
-2.30%
1.25%
1.99%
-0.20%
18.75%
-2.30%
1.25%
1.99%
-0.20%
18.75%
79.20% 79.20%
0.05
0
0.25
0.6
0.27
0.11
-1.2
0
0
0.025
0
-0.01
0.02
-0.95
6.25
0.5
0
0
-0.01
-1.1
0.15
-0.9
0
0
2
0
0.05
0
0.25
0.6
0.27
0.11
-1.2
0
0
0.025
0
-0.01
0.02
-0.95
6.25
0.5
0
0
-0.01
-1.1
0.15
-0.9
0
0
2
0
2013
54%
5.89%
-0.58%
-7.50%
5.13%
1.56%
2014
36.58% 36.58%
54%
5.89%
-0.58%
-7.50%
5.13%
1.56%
-2.30%
1.25%
1.99%
-0.20%
18.75%
-2.30%
1.25%
1.99%
-0.20%
18.75%
79.20% 79.20%
0.05
0
0.25
0.6
0.27
0.11
-1.2
0
0
0.025
0
-0.01
0.02
-0.95
6.25
0.5
0
0
-0.01
-1.1
0.15
-0.9
0
0
2
0
-1.2
0
0
0.025
0
-0.01
0.02
-0.95
6.25
0.5
0
0
-0.01
-1.1
0.15
-0.9
0
0
2
0.05
0
0.25
0.6
0.27
0.11
0
56

MGM MIRAGE: Ratio Analysis
1999
108.00%
Actual at Year End
2000 2001 2002
131.61% 16.23% 1.62%
2003
3.07%
2004 2005 2006 2007
Forecasted at Year End
2008 2009 2010 2011 2012 2013 2014
8.42% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00%
Sales Growth
Liquidity Analysis:
Current Ratio
Quick Asset Ratio
Accounts Receivable Turnover
Days supply of recievables
Inventory Turnover
Days supply of inventory
Working captal turnover
Profitability Analysis:
Gross Profit Margin
Operating expense ratio
Net profit margin
Asset turnover
Return on Assets
Return on equity
Capital Structure Analysis:
Debt to equity ratio
Times interest earned
Debt service margin
0.93
0.77
16.68
21.88
48.07
7.59
(68.70)
47.15%
13.65%
6.21%
0.505
3.14%
8.41%
1.95
(3.40)
36.92
0.65
0.52
13.57
26.90
19.78
18.45
(7.34)
46.84%
13.06%
5.01%
0.30
1.50%
6.75%
4.02
(1.89)
1.57
0.75
0.58
25.85
14.12
26.24
13.91
(16.51)
45.12%
14.37%
4.55%
0.36
1.62%
6.76%
3.53
(1.80)
4.74
0.79
0.58
27.10
13.47
29.89
12.21
(23.67)
46.40%
14.56%
7.71%
0.36
2.78%
10.98%
3.22
(2.64)
119.03
0.99
0.79
28.03
13.02
33.16
11.01
(525.52)
44.69%
15.09%
6.23%
0.36
2.28%
9.62%
0.89
0.72
20.75
0.95
0.75
27.5
0.95
0.75
27.5
0.95
0.75
27.5
0.95
0.75
27.5
0.95
0.75
27.5
0.95
0.75
27.5
0.95
0.75
27.5
0.95
0.75
27.5
0.95
0.75
27.5
0.95
0.75
27.5
17.59
32.62
15.25
35
15.25
35
15.25
35
15.25
35
15.25
35
15.25
35
15.25
35
15.25
35
15.25
35
15.25
35
11.19
10.95
10.95
10.95
10.95
10.95
10.95
10.95
10.95
10.95
10.95
(41.07) ($32.61) ($32.61) ($32.61) ($32.61) ($32.61) ($32.61) ($32.61) ($32.61) ($32.61) ($32.61)
40.21% 52.15% 52.15% 52.15% 52.15% 52.15% 52.15% 52.15% 52.15% 52.15% 52.15%
14.28% 14.26% 13.06% 11.96% 10.95% 10.03% 9.18% 8.41% 7.70% 7.05% 6.46%
9.57% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00%
0.38
3.65%
0.55
4.00%
0.55
4.00%
0.55
4.00%
0.55
4.00%
0.55
4.00%
0.55
4.00%
0.55
4.00%
0.55
4.00%
0.55
4.00%
0.55
4.00%
14.66% 17.35% 17.35% 17.35% 17.35% 17.35% 17.35% 17.35% 17.35% 17.35% 17.35%
3.10
(4.00)
N/A
3.10
(4.00)
N/A
3.10
(4.00)
N/A
3.10
(4.00)
N/A
3.10
(4.00)
N/A
3.10
(4.00)
N/A
3.10
(4.00)
N/A
3.10
(4.00)
N/A
3.10
(4.00)
N/A
3.53
(2.09)
78.04
3.02
(3.20)
N/A
3.10
(4.00)
N/A
MGG-7
57

Discounted Free Cash Flow
Cash Flow From Operations
Cash Provided (used) by investing activities
Free Cash Flows (to firm)
Discount Rate
PV of freecash flows
Total PV of annual cash flows
Continuing Terminal Value
PV of Continuing Terminal Value
Value of the Firm (end of 2004)
BV of Debt and preferred stock
Value of equity (end of 2004)
Estimated value per share
Actual Price per share as of 4/01/2005
WACC
Growth
2004
$3,140,318,467.46
$14,566,334,271.97
$17,706,652,739.42
$8,343,325,000
$9,363,327,739.42
$65.43
2005 2006 2007 2008 2009 2010 2011 2012 2013
$830,905,494.00
$807,821,245.00
$840,377,370.00
$713,510,490.00
$841,685,705.00
$843,369,076.41
$819,938,563.68
$852,983,030.55
$724,213,147.35
($356,446,825.00) ($358,229,059.13) ($360,020,204.42) ($361,820,305.44) ($363,629,406.97) ($365,447,554.00) ($367,274,791.77) ($369,111,165.73) ($370,956,721.56)
$474,458,669.00
$449,592,185.88
$480,357,165.58
$351,690,184.56
$478,056,298.03
$477,921,522.41
$452,663,771.90
$483,871,864.82
$353,256,425.79
0.950
$450,877,762.05
0.903
$406,012,695.46
0.858
0.816
$412,235,664.84
$286,815,069.65
0.775
$370,494,011.03
0.736
0.700
$351,980,955.82
$316,809,900.54
0.665
$321,820,575.54
0.632
$223,271,832.52
$9,206,491,116.73
2014
$854,310,990.58
($372,811,505.17)
$481,499,485.40
$70.38
0.0523
0
WACC 0.03
0.04
0.0523
0.06
0.07
0
141.1
96.74
65.43
52.37
39.69
Sensitivity Analysis g
0.01
229.83
141.1
89.5
70.12
52.37
MGG-8
0.015
318.56
176.59
106.37
81.95
60.44
0.025
1028.4
318.56
158.65
115.75
81.95
58

MGM Mirage
Residual Income Valuation
Beginning BE (per share)
Earnings Per Share
Dividends per share
Ending BE (per share)
Ke
"Normal" Income
Residual Income (RI)
Present Value of RI
BV Equity (per share) 2004
Total PV of RI (end 2013)
Continuation (Terminal) Value
PV of Terminal Value (end 2004)
Estimated Value (2005)
Actual Price per share
Growth
2004
19.88
0.0545
1
2005
19.88
$2.77
22.65
1.08
1.68
1.60
19.88
8.12
6.15
$34.15
2
2006
22.65
$2.78
25.43
1.23
1.54
1.39
3
2007
25.43
$2.79
4
Forecast Years
2008
28.21
$2.80
28.21
1.39
1.40
1.20
31.01
1.54
1.26
1.02
$70.38
0
Ke 0.03
0.04
0.0545
0.06
0.07
Sensitivity Analysis
$48.39
0
$41.20
$34.15
$32.05
$28.75
MGG-9 g
0.01
$48.38
$41.19
$34.14
$32.04
$28.74
5
2009
31.01
$2.81
33.82
1.69
1.12
0.86
59
6
2010
33.82
$2.82
36.63
1.84
0.97
0.71
0.015
$48.38
$41.19
$34.14
$32.04
$28.74
0.025
48.37
41.18
34.13
$32.03
$28.74
7
2011
36.63
$2.83
39.46
2.00
0.83
0.57
8
2012
39.46
$2.84
42.29
2.15
0.69
0.45
2013
42.29
$2.85
9 perp.
45.14
2.31
0.54
0.34
0.54
9.908257

MGM Mirage
Abnormal Earnings Growth Valuation
Earnings Per Share
DPS
DPS invested at 3.21%
Cum-Dividend Earnings
Normal Earnings
Abnormal Earning Growth (AEG)
PV Factor
PV of AEG
EPS of 2005
Total PV of AEG
Continuing (Terminal) Value
PV of Terminal Value
Total PV of AEG
Capitalization Rate (perpetuity)
Value Per Share
Ke g
Actual Price per share
2004
0.0545
0
$70.38
2005
$2.760
$0.00
1
2006
$2.78
$0.00
$0.00
$2.78
$2.91
($0.13)
2
2007
$2.79
$0.00
$0.00
$2.79
$2.93
($0.14)
3
Forecast Years
2008
$2.80
$0.00
$0.00
$2.80
$2.94
($0.14)
4
2009
$2.81
$0.00
$0.00
$2.81
$2.95
($0.14)
5
2010
$2.82
$0.00
$0.00
$2.82
$2.96
($0.14)
6
2011
$2.83
$0.00
$0.00
$2.83
$2.97
($0.14)
7
2012
$2.84
$0.00
$0.00
$2.84
$2.98
($0.14)
8
2013
$2.85
$0.00
$0.00
$2.85
$2.99
($0.14)
Perp
2014
0.00
$2.76
($0.90)
$0.00
$1.86
0.0545
$34.16
0.948
($0.126)
0.899
($0.127)
0.853
($0.121)
0.809
($0.115)
Ke
0.767
($0.110)
0.727
($0.104)
0.690
0.654
($0.099) ($0.095)
$0.00
0.03
0.04
0.0545
0.06
0.07
Sensitivity Analysis
$74.89
$51.99
0 g
0.01
$74.63
$51.81
$34.16
$29.76
$23.66
$34.03
$29.65
$23.58
0.015
$74.49
$51.71
$33.97
$29.60
$23.53
0.025
$74.23
51.53
33.85
$29.49
$23.45
MGG-10
60

Balance Sheet Debt
Current liabilities
Accounts payable
Income taxes payable
Current portion of long-term debt
Accrued interest on long-term debt
Other accrued liabilities
Liabilities related to assets held for sale
Total current liabilities
Deferred income taxes
Long-term debt
Other long-term obligations
Total Non-Current Liabilities
Total Liabilities
Weighted Average Cost of Debt
Principal
$198,050,000
$4,991,000
$14,000
$116,997,000
$607,925,000
$0
$927,977,000
$1,802,008,000
$5,458,848,000
$154,492,000
$7,415,348,000
$8,343,325,000
Percent of Total
Liabilities
Computed
Interest Rate
Value Weighted
Rate
2.37%
0.06%
0.00%
1.40%
7.29%
0.00%
11.12%
21.60%
65.43%
1.85%
88.88%
100.00%
0.00%
0.00%
7.27%
2.74%
2.74%
0.00%
0.00%
7.27%
8.27%
0.00%
0.00%
0.00%
0.038%
0.200%
0.000%
0.000%
4.757%
0.153%
5.15%
The 2.74% Computed Interest Rate was taken from Economagic.com: Economic Time Series Page
MGG-11
61

Long Term Debt
6.95% Senior Notes, due 2005
6.625% Senior Notes, due 2005
7.25% Senior Notes, due 2006
9.75% Senior Subordinated Notes, due 2007
6.75% Senior Notes, due 2007
6.75% Senior Notes, due 2008
6.875% Senior Notes, due 2008
6% Senior Notes, due 2009
8.5% Senior Notes, due 2010
8.375% Senior Subordinated Notes, due 2011
6.75% Senior Notes, due 2012
5.875% Senior Notes, due 2014
7.25% Senior Debentures, due 2017
Other notes
Less: Current portion
Principal
300,087,000
176,096,000
235,511,000
706,968,000
189,115,000
168,908,000
199,095,000
1,056,453,000
822,214,000
400,000,000
550,000,000
522,301,000
81,919,000
195,000
5,458,862,000
(14,000)
$5,458,848,000
MGG-12
Rate
6.95%
6.63%
7.25%
9.75%
6.75%
6.75%
6.88%
6.00%
8.50%
8.38%
6.75%
5.88%
7.25%
62
Weight
0.05497
0.03226
0.04314
0.12951
0.03464
0.03094
0.03647
0.19353
0.15062
0.07328
0.10075
0.09568
0.01501
Value
Weighted Rate
0.382%
0.214%
0.313%
1.263%
0.234%
0.209%
0.251%
1.161%
1.280%
0.614%
0.680%
0.562%
0.109%
7.271%

Monthly Yield
Risk Free
0.00321
0.00328
0.00308
0.00289
0.00280
0.00279
0.00294
0.00300
0.00309
0.00314
0.00281
0.00265
0.00266
0.00274
0.00273
0.00260
0.00256
0.00233
0.00283
0.00253
0.00254
0.00242
0.00232
0.00244
0.00210
0.00189
0.00239
0.00395
0.00388
0.00374
0.00349
0.00318
0.00274
0.00245
0.00246
0.00254
0.00397
0.00381
0.00343
0.00326
0.00331
0.00366
0.00362
0.00358
0.00522
0.00558
0.00525
0.00515
0.00505
0.00494
0.00482
0.00475
0.00431
0.00405
0.00408
0.00387
0.00397
0.00411
0.00401
Date Firm's Return SP500 Return
Mar-00
Apr-00
0.207243461
0.229166667
0.096719896
-0.03079582
May-00 0.101694915
-0.021914998
Jun-00 -0.011076923
0.023933549
Jul-00 0.118232732
-0.016341262
Aug-00 -0.043405676
0.060699035
Sep-00 0.110820244
-0.053482948
Oct-00
Nov-00
-0.09505106
-0.004949496
-0.171875
-0.08006856
Dec-00 -0.015024458
1-Jan 0.034054629
0.004053386
0.034636592
1-Feb
1-Mar
1-Apr
1-May
-0.07787307
-0.092290686
-0.0625
0.198007968
0.045560359
-0.06420472
0.076814355
0.005090199
1-Jun -0.047073791
-0.025003583
1-Jul 0.031375167
-0.010772447
1-Aug -0.056634304
-0.064108386
1-Sep -0.228816467
-0.08172339
1-Oct -0.008007117
1-Nov 0.18161435
1-Dec
2-Jan
0.095635674
0.01735931
0.075957734
0.007573829
0.12781434
-0.015573828
2-Feb
2-Mar
0.056511057
-0.020766236
0.053197674
0.036738861
2-Apr 0.108197626
-0.061661684
2-May -0.061270237
-0.008823748
2-Jun -0.104537012
-0.072464719
2-Jul 0.037037037
-0.078994959
2-Aug
2-Sep
0.014
0.051000282
2-Oct -0.166219839
0.00488142
-0.110013427
0.086447767
3-Jul
3-Aug
3-Sep
3-Oct
3-Nov
3-Dec
4-Jan
4-Feb
4-Mar
2-Nov 0.087459807
0.057057701
2-Dec -0.025133057
-0.060332582
3-Jan -0.205338186
-0.027414698
3-Feb -0.022137405
-0.017003623
3-Mar 0.141686183
3-Apr -0.028376068
3-May -0.005981703
3-Jun 0.209911504
0.008357606
0.081044118
0.050898661
0.011332621
0.003510825
0.057142857
-0.02872777
0.055774648
0.003468517
0.074448285
0.077703539
0.016213276
0.017873191
0.007997794
-0.011944326
0.054961495
0.007128513
0.050765451
0.017276423
0.01220903
0.041102181
-0.016358936
4-Apr 0.010366123
-0.016790829
4-May -0.030561013
0.012083446
4-Jun
4-Jul
0.056969151
-0.05943758
0.017989078
-0.034290523
4-Aug -0.063646659
4-Sep 0.201015965
4-Oct
4-Nov
0.083585096
0.083643123
0.002287333
0.009363906
0.014014248
0.038594939
4-Dec 0.247684391
0.032458128
5-Jan -0.012785263
-0.025290448
Market Risk
Premium
-0.02000
0.00881
0.01491
-0.03718
-0.00051
0.00657
0.01107
0.03559
0.02937
-0.02843
0.05453
-0.06287
-0.02983
-0.01932
0.00592
0.07894
0.04901
0.00894
0.01340
0.01522
-0.01460
0.05222
0.00440
0.04817
0.01472
0.00988
-0.01918
-0.02897
-0.01458
-0.06754
-0.08498
0.01405
0.07230
0.00396
-0.01916
-0.02472
0.03286
-0.06540
-0.01232
-0.07564
-0.08174
0.00243
-0.11247
0.08391
0.09150
-0.03637
-0.02716
0.01878
-0.02139
0.05576
-0.05830
-0.00970
-0.08438
0.00000
0.03056
-0.09616
-0.06817
0.07271
0.00108
Beta Estimate
0.699241482
Estimated Ke
Estimated Kd
Short horizon (2 years)
0.747914244
Estimated Ke
R^2
R-Squared
0.100696083
Short horizon (3 years)
0.110363416
Estimated Ke
R^2
Average Risk
Free Rate
0.032073333
Netscape Published
Beta
0.71
Historical Market
Risk Premium
3.00%
5.31%
5.15%
5.45%
4.83%
3.54%
0.26%
MGG-13
63