Value Line Case
Exhibit 1
Sales ($Billions)
Hardware
Home Centers
Lumber
Total Market
1997
22.8
64.5
51.5
138.8
Sales figures for retail-Building Strategy Industry
1998
1999
2000
2001
26.2
89
59
149.5
159.7
168
174.2
Share of market
Home depot Inc
Lowe's Companies
Truserve Corp
Menard, Inc
2001
22.90%
10.80%
2.90%
1.50%
Sorce: Economist intelligence unit.
Exhibit 2
Historical Company Performance
1997
1998
1999
2000
2001
Home Depot
Number of stores
Sqft Footage (millions)
Number of transsaciones
Number of employees
624
66
550
124,400
137
761
81
665
156,700
169
930
100
797
201,400
204
1134
123
937
227,300
199
1333
146
1091
256,300
Lowe's
Number of stores
Sqft Footage (millions)
Number of transsaciones
Number of employees
477
40
231
64,070
520
48
268
72,715
576
57
299
86,160
650
68
342
94,601
744
81
395
108,317
Excludes Apex Spply, Georgia Lighting, Maintenance Warehouse, Your "other" Warehouse, and national blinds
Exhibit 3
Cost of Capital Calculation
Current yield on long term US treasures
Historcal market-risk premium
4.80%
5.50%
Home Depot
Proportion of debt capital (market value)
Cost of debt (current yields of AAA-rated debt)
Marginal tax rate
Cost of equity (beta=1.4)
Weighted average cost of capital
2%
6.80%
38.60%
12.50%
12.30%
Lowe's
Proportion of debt capital (market value)
Cost of debt (current yields of AAA-rated debt)
Marginal tax rate
12%
7.30%
37%
39.37%
40.2%
Cost of equity (beta=1.4)
Weighted average cost of capital
12.50%
11.60%
dustry
2002E
2006E
26.2
91.9
60.1
178.2
26.0
102.0
66.0
194.0
2002
15.0%
200
1533
2003
13.2%
202
1735
2004
9.0%
156
1891
2005
7.0%
133
2024
2006
5.5%
111
2135
123
867
130
997
140
1137
140
1277
140
1417
41.0%
41.8%