Valued at 1 April, 2007

Matthew Lewis: matthew.lewis@ttu.edu Tyler Page: tyler.page@ttu.edu Alex Segreti: alexander.l.segreti@ttu.edu Andrea Spencer: andrea.spencer@ttu.edu Stephen Wiggins: stephen.wiggins@ttu.edu

Table of Contents
Executive Summary Business & Industry Analysis. Five Forces Model Rivalry Among Existing Firms Threat of New Entrants Threat of Substitute Products Bargaining Power of Buyers Bargaining Power of Suppliers Competitive Advantage Analysis Key Success Factors Accounting Analysis Key Accounting Policies Accounting Flexibility Accounting Strategy Quality of Disclosure Revenue Manipulation Diagnostics Expense Manipulation Diagnostics Potential “Red Flags” Undo Accounting Distortions Ratio Analysis Forecast Financials Liquidity Analysis Profitability Analysis Capital Structure Analysis Extended Ratio Analysis SGR and IGR Analysis Forecasting Valuation Analysis Cost of Equity Cost of Debt WACC Method of Comparables Intrinsic Valuation Models Altman Z-Score Analyst Recommendation Appendix Works Cited 3 7 8 9 10 11 12 13 14 14 16 16 18 20 21 23 26 29 30 31 31 37 44 46 47 47 61 61 66 67 68 72 78 79 80 84

1

2

Executive Summary
Investment Recommendation: Overvalued, Sell BBBY – NASDAQ $40.40 52 week range $30.92 - $43.32 Revenue (2006) $5,809,562,000 Market Capitalization $11.75 Billion Shares Outstanding 283,380,000 3-month Avg. Daily Trading Volume 2,332,640 Institutional Ownership 83.40% Insider Ownership 3.70% Book Value Per Share (mrq) $9.35 ROE 25.99% ROA 17.90% Est. 5 year EPS Growth Rate 9.00% Cost of Capital Est. R2 Beta Ke Ke Estimated 13.01% 10-Year 37.4 2.28 15.87% 7-Year 37.4 2.28 12.56% 5-Year 37.5 2.29 12.62% 1-Year 37.8 2.30 12.71% 3-Month 37.8 2.31 13.01% Published 1.76 Kd BBBY: 5.74% Revised: 2.66% WACC BBBY: 12.03% Revised: 10.3% Altman Z-Score BBBY: 8.05 04/1/2007

EPS Forecast FYE 03/03 2006(A) 2007(E) 2008(E)