Conrail-Analysis by niusheng11

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									Average and Median Multiples (calculated from Exhibit 6)

                                           Book
                                  EPS      Value        Sales     EBITDA     Premium Synergy Ratio
All 5 Deals
Average                            17.22       3.64        2.42      10.58      53.3%    24.8%
Median                             18.13       3.69        2.37       9.91      53.0%    24.5%

Multiples Valuation

Price/Earnings Multiples                              Sales Multiple
Conrail EPS (last 4Q)               4.84              Conrail Sales (last 4Q)              3722
Average EPS Multiple               17.22              Average Sales Multiple                2.42
Equity Value Per Share            $83.34              Firm Value                           9007
                                                      Debt Value (3Q, 1996)                2094
Conrail 1996 est. EPS               4.91              Equity Value                         6913
Average EPS Multiple               17.22              Equity Value per Share             $76.39
Equity Value Per Share            $84.55

Conrail 1997 est. EPS               5.69              Market/Book Multiple
Average EPS Multiple               17.22              Conrail Book Value                  32.46
Equity Value Per Share            $97.98              Average Multiple                     3.64
                                                      Equity Value Per Share            $118.15

EBITDA Multiple                                       Acquisition Premium
Conrail EBITDA (last 4Q)            1017              Conrail Stock Price                    71
Avereage EBITDA Multiple           10.58              Average Premium                    53.3%
Firm Value                         10760              Equity Value Per Share            $108.84
Debt Valueu (3Q 1996)               2094
Equity Value                        8666
Equity Value per Share            $95.76
                                                        1997    1998    1999    2000    2001
Total Gain in Operating Income                             0     188     396     550     567

Terminal Value (growing perpetuity)                                                     5043
   TV growth rate                       3%
   Tax Rate                            35%

Change in Profit After Tax                                 0     122     257     358    3646
   Discount rate (Ka)                 14.6%
   Discount factor                                      0.873   0.762   0.665   0.580   0.506


Present Value of Change in PAT                             0      93     171     207    1846
   Present Value                               2318
   # of Conrail Acquisition Shares              90.5
   Per Share Present Value                    $25.61


Conrail Valuation
  Base Value                                  $71.00
  Present Value of Change in PAT               $25.61
                    Total Value               $96.61
Asset Beta Calculation
                                  Conrail                                    CSX
Debt (book value)               $  2,094 A case X-6                  $     2,765 A case X-4
Equity (market value)
 #Shares (millions)                  77.4   A case X-3                      212.6   A case X-5
 Pre-announcement Price            $71.00   A case p.4                    $49.50    A case p.4
     Total Equity                 $5,495    calculated                   $10,524    calculated
          Total Capital            $7,589   calculated                    $13,289   calculated
Debt to Total Capital                28%    calculated                       21%    calculated
Equity to Total Capital              72%    calculated                       79%    calculated
Equity Beta                          1.30   A case X-8                       1.35   A case X-8
Debt Beta                            0.10   assumed                          0.10   assumed

Asset Beta                           0.97 calculated                         1.09 calculated

Acquisition Value of Conrail      $10,149
 Value as % of Merged Total          43%                                    57%

Blended Beta                          1.04
Risk-free Rate                       6.8% A case X-8, 30-yr T-Bond
Risk Premium                         7.5% assumed

Blended Asset Cost of Capital       14.6%

								
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