Recent Price: $35.89 (11/28/08) Target Price: $ Price Performance vs. S&P 500. Dividends. Profitability EMR UTX ITW Industry

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1 Student Investment Fund Stock Report Emerson Electric Co. NYSE: EMR Analysts: Randy Kidder & Michael Hooper Recommendation: Buy Market Cap: $.B Recent Price: $.8 (/8/08) Target Price: $. Sector: Conglomerate Sub-Sector: Electronics Highlights EMR is the world s largest maker of power equipment for oil and energy companies. China recognizes EMR as a world s leading HVAC technology provider. In 08, China contracted EMR to serve China s growing nuclear industry. EMR also opened a worldclass manufacturing facility in China. In 08, EMR selected to modernize coal-fired plant control systems by NTPC, Ltd., India s largest power utility. In 08, EMR secured a long-term agreement with QatarGas Operating Company Ltd., world s largest supplier of natural gas. EMR will host the first in a series of regional bioenergy summits to discuss how to translate alternative fuels technology into sustainable large-scale commercial production. Business Summary Emerson Electric Company is a global technology company engaged in designing and supplying product technology and delivering engineering services in a range of industrial, commercial and consumer markets. EMR operates four business segments that include: Process Management, Industrial Automation, Network Power, and Appliance and Tools. EMR s commitment to innovation provides new products and services which help businesses modernize industrial processes, consumers increase energy efficiency and emerging markets build infrastructure. EMR successfully continues to execute strategies to globalize assets and manage its business mix, positioning it for strong future growth. Investment Thesis EMR is well positioned for economic uncertainty with a growing global presence in a well-diversified group of BB and BC markets. EMR has a -year EPS growth rate of.%, a current dividend yield of.80% and a -year history of raising dividends annually. EMR s strong historical valuations including a high ROIC, growing free cash flow and EVA are forecast to continue to grow in a conservative discounted cash flow valuation model. EMR is currently trading at a P/E ratio of.7x. The -year historical P/E range is.0x.8x Price Performance vs. S&P 00 Dividends EMR Financial Statistics vs. Selected Competitors & Industry Profitability EMR UTX ITW Industry Sales, -Yr. Growth Rate.%.8%.0% 8.8% Gross Margin, -Yr. Avg..% 7.%.%.% Operating Margin, -Yr. Avg..%.%.%.% Net Margin, -Yr. Avg..% 8.0%.%.% Valuation & Performance EMR UTX ITW Industry Price/Earnings, (TTM).7x.0x.0x.x Return on Assets, (TTM).0%.00%.%.% ROIC, 07.%.%.0% EPS, -Yr. Growth Rate 7.% 7.%.0% Dividend Yield, Current.80%.%.70% 0.0%

2 Emerson Electric Randy Kidder Michael Hooper Business Segments Process Management (% of FY08 sales), provides measurement, control and diagnostic capabilities for automated industrial processes for companies in the foods, fuels, medicines and power industries. The long-term trend of increasing demand for energy is driving capacity expansion and facility upgrades. FY07 sales: % US, % Europe, % Asia FY08 sales: % US, % Europe, % Asia Industrial Automation (% of FY08 sales), offers integrated manufacturing solutions to diverse industries globally. Infrastructure investment in emerging markets and worldwide demand for reliable primary and standby power provides ongoing growth opportunities. FY07 sales: % US, % Europe,% Asia FY08 sales: % US, % Europe, % Asia Network Power (% of FY08 sales), provides reliable power sources and environmental conditioning for telecommunication systems, data networks and critical business applications to ensure continuous operation. EMR provides industrial electric motors for a variety of industries. EMR also provides air conditioning, refrigeration, appliances and energy efficient technologies for household and commercial use. US data centers use $. B worth of electricity this is expected to double by. The demand for network reliability is growing in emerging markets. FY07 sales: % US, % Europe, 7% Asia FY08 sales: % US, % Europe, 8% Asia Climate Technologies (% of FY08 sales), provides products and services in all areas of residential and commercial cooling and refrigeration. This division provides digital remote monitoring and control of refrigeration units in grocery stores and other distribution sites. EMR provides refrigeration for stores, medical equipment, trucks and transport containers. Environmental regulations call for a 7% decrease in use of R- refrigerant. EMR produces the most efficient line of scroll compressors that run on the replacement refrigerant. EMR has developed heat pump compressors that expand their effective geographic use area. Significant growth is expected in the US and China. FY07 sales: 7% US, % Europe, 7% Asia FY08 sales: % US, % Europe, 8% Asia Appliance and Tools (% of FY08 sales), provides a broad range of services and products in motors, appliances, components and storage. Motors are used in residential and commercial settings. Storage solutions provide free standing, fixed and mobile units for home use, food service and medical uses. Consumer and housing sectors expected to continue below trend growth in 0. EMR will focus on costs and asset management to create value. FY07 sales: 77% US, % Europe, % Asia FY08 sales: 8% US, % Europe, % Asia Climate Techn ologies FY08 Sales $.8B % of Total Sales.% Growth Appliance and Tools FY08 Sales $.B % of Total Sales -.% Growth Network Power FY08 Sales $.B % of Total Sales % Growth Process Management FY08 Sales $.8B % of Total Sales.% Growth Industrial Automation FY08 Sales $.B % of Total Sales.% Growth Page

3 Emerson Electric Randy Kidder Michael Hooper Global Presence EMR conducts sales, research and development as well as manufacturing on a global basis. of their manufacturing facilities are located outside the United States, mostly in Europe, but they also have a significant, and growing, presence in Asia. International growth is strategic to EMR s success. Their international focus is on infrastructure. EMR divides its international business into five regions. Asia/Pacific (FY08: $.B in sales, 7% of total sales, 7% growth). EMR conducts significant manufacturing, R&D, and marketing activities in India, China, Thailand and the Philippines. Europe/Eastern Europe and Russia (FY08: $.7B in sales, % of total sales, % growth). Eastern Europe offers great opportunity for growth. Emerson has major customers in Poland, Hungary, Russia, Turkey, Azerbaijan, and Kazakhstan. Latin America (FY08: $.B in sales, % of total sales, 8% growth). EMR conducts business in Argentina, Brazil, Columbia, Mexico and Venezuela. Middle East/Africa (FY08: $.B in sales, % of total sales, 7% growth). Major customers in this region are in the oil and gas industry. North America (FY08: $.B in sales, % of sales, % growth). The majority of EMR s sales occur in North America but growth is stagnant. Macroeconomic Assumptions Growth rates in emerging markets, such as China and India, will slow but will remain relatively high compared to the United States and Europe. As of November 08, China s projected growth for 0 is 8.%. China must maintain a growth rate of 8% to keep pace with the number of new entrants in the job market. China recently introduced a $8 billion stimulus package primarily targeted on building infrastructure. India s projected growth rate is.0% for 0. India plans a $00 billion infrastructure investment. Investment in electrical infrastructure leads their list. India needs a -fold increase in electrical production capacity to meet the average growth in demand of 8%. Industrialization and a rapidly growing middle class in developing countries and emerging markets increases competition for energy and will lead to an eventual return of high prices. This will lead to increases in the need for additional supplies of traditional energy sources such as oil, gas and electric. There will also be a demand for innovative, energy-efficient industrial solutions and consumer products. A growing middle class increases the demand for a reliable primary and backup power supply as businesses grow and consumers purchase additional technology for home use. This also leads to an increased demand for telecommunication and with it new construction and improvements in infrastructure. Innovation as a Strategy Between 0 and 07, EMR introduced 77 new products, a 8% increase over the previous three years. In 07, EMR received 70 patents worldwide and spent $87 million.8% of sales on new and existing product development. US & Canada Sales for FY08 $.B % Growth Western Europe Sales for FY08 $.8B % Growth Eastern Europe/Russia Sales for FY08 $0.B % Growth Latin America Sales for FY08 $.B 8% Growth Middle East/Africa Sales for FY08 $.B 7% Growth Asia/Pacific Sales for FY08 $.B 7% Growth FY08 International Sales: % of Total Sales Emerging Market Sales: 0% of Total Sales International Sales Growth: % Page

4 Emerson Electric Randy Kidder Michael Hooper Valuation A discounted cash flow (DCF) model suggests that EMR is currently undervalued. The model returns a fair value of $. for 08 and supports a -month target price of $.. EMR s closing price on Nov was $.8. Revenue growth is modeled on a year-by-year basis to better reflect EMR s growth prospects. Revenue is projected to grow at.0% in 08, 8% in 0, % in - and then tapers off to a long-term sustainable rate of % in 8 and beyond. EMR s historical -YR growth rate avg. is.8%. COGS/Sales is modeled slightly higher than the historical average, which is trending lower. Although EMR is reducing costs through better capacity utilization, an improved global supply chain, greater efficiencies, and improved cost controls these savings are offset by rising raw materials and energy costs. SG&A costs are adjusted down.% from the historical average. EMR has a historical trend of declining SG&A costs. Our forecast continues that trend while allowing for growth in actual dollar costs. Tax Rate is modeled at % to compensate for an unusually low 0 tax rate, which coincidently matches EMR s forecasted tax rate for 0. Share Growth/Diluted Share Growth is set at 0%. EMR has historically bought back shares, as represented in the historical average of -.%. A 0% rate ensures that EPS and intrinsic value per share are modeled conservatively. Cash, Inventory, Acts Payable, Net PPE and Notes Payable are each increased above their historical averages. This helps dampen an already historically high ROIC (.% to.%). The model also increases Net PPE steadily on a year-by-year basis,.% in 08 to % for -7. In addition to more conservatively forecasting ROIC, it provides for a smoother free cash flow throughout the forecast period. WACC and Beta. The model uses a WACC at.%. We use a beta of. based on a risk-free rate of % and market risk premium of %. Our regression calculation yielded a beta of.0 at the end of October 08. On November, 08, a casual survey of financial websites found beta calculations ranging from.8 to.. Long-term Horizon Value Growth. A % long-term horizon value growth rate is conservative considering EMR s investment in new product development and their brand strength in a number of industries. Model Outputs Margins. The forecast model projects no growth in margins over the -year forecast period. This helps to compensate for some of the current economic uncertainty. Historically, EMR s margins are improving based on volume leverage, favorable business mixes, cost control measures. For FY08, Operating Margin was up 7%. ROA is modeled to average 8.7% over the forecast period. This is slightly higher than EMR s historical average for ROA, which was 8.0% from 0-07 and models a trend for a growing ROA. ROE is conservatively modeled to be at lower than historical levels. ROE gradually declines from.% to.% over the forecast period. ROIC remains at high levels in the DCF model although inputs, primarily Net PPE, are adjusted to moderate and taper ROIC. High ROIC is justified based on strong free cash flow, investment in R&D and strong brands, positioning EMR as a market leader in several business segments. EMR is also able to compete on price and quality, creating a barrier to entry. EVA and MVA. Even with conservative forecast assumptions, EVA is projected to grow from $,7M in 08 to $,0M in 7. MVA is expected to grow from $,7M to $,7M over the forecast period. EMR has significant potential to continue their trend of creating value for shareholders. Economic Value Added Economic Value Added & Market Value Added (millions) $,00 $,000 $,00 $,000 $,00 $, E 0E E E E E E Economic Value Added E E 7E Market Value Added $,000 $,000 $,000 $,000 $,000 $,000 $7,000 $,000 Per Share Valuation. The DCF model returns a per share intrinsic value of $. for 08 and $. in 0. EMR s stock has traded in the low to mid $0 range during the last months over this period the stock price has ranged from $0. to $.0. Forecasted Share Value $0.00 $80.00 $70.00 $0.00 $0.00 $.00 $0.00 $.00 $.00 $ Free Cash Flow & Forecasted Share Price 08 0 Free Cash Flow 7 Forecasted Share Value $,000 $,000 $,000 $,000 $,000 Free Cash Flow. The trend in historical free cash flow growth is very strong. Our model predicts strong free cash flow generation for the forecast period even with conservative modeling assumptions. $0 Market Value Added Free Cash Flow (in millions) Page

5 Emerson Electric Randy Kidder Michael Hooper Multiples-Based Valuation DCF projections of fair market value were compared to prices based on past key multiples to help evaluate our model. Our comparison yielded higher fair price forecasts for all multiple computations with the exception of 08. In 08, the Price/FCF multiple yielded a lower fair value price due to the DCF model s significant drop in projected free cash flow. Risks Changes in Global GDP growth rates that differ significant from forecasted rates may affect anticipated levels of government and business investment as well as consumer spending. A global recession deeper and longer than anticipated may reduce the demand for consumer products, industrial investment in process improvement and investment in infrastructure. Retrenchment from globalization and free trade may limit EMR s ability to grow international sales and engage in manufacturing and related research and development. Multiples-based Per Share Price 08E 0E E E Price /Sales $.00 $. $. $7.88 Price/EBITDA $0. $.8 $7. $7. Price/FCF $.8 $8. $. $. Enterprise Value/ EBITDA $7. $7.7 $7. $87. Price/Earnings $7. $.0 $8. $7. DCF Price $. $. $.7 $.0 Reduction in levels of investment in infrastructure in countries in which EMR has a strong presence may adversely affect Emerson s international strategy of supporting infrastructure development. Sustained low prices or further decline in energy prices may reduce incentive for investment in additional production, building of new facilities, and the desire of companies to improve efficiencies in their processes. Decline in global demand for telecommunications may affect investment in infrastructure and innovative solutions. Fluctuations in foreign currency exchange rates may have an adverse affect on financial results. Profitability EMR has steadily improved gross, operating and net profit margins despite increasing competition and rising commodity prices. Increased sales volume has helped to leverage fixed operating costs. EMR has worked to reduce fixed costs in favor of variable costs, when possible, and has restructured its portfolio of products and businesses when needed to improve profitability. An emphasis on building its global footprint, ongoing investment in new technology initiatives, emphasis on new products as well as building technology and engineering capacity in best cost regions has strengthened margins. EMR is able to compete on price and quality, protecting margins. Profitability EMR UTX ITW Industry Sales, (TTM) vs. TTM yr. ago.%.%.0%.% Gross Margin, (TTM).8% 7.%.%.0% Operating Margin, (TTM).%.%.7%.% Net Margin, (TTM).8% 8.%.8%.% Relative Valuation EMR UTX ITW Industry Price /Sales (TTM) Price/Book (MRQ) Price/Free Cash Flow (TTM) Price/Earnings (TTM) EPS Growth (TTM) N/A Relative Valuation EMR s valuation ratios suggest that EMR s investors are willing to pay a premium for EMR as compared to its industry. In regards to the selected competitors, EMR is priced at a slight premium over UTX and ITW, with the exception of the P/E ratio. EMR compares favorably to UTX, already in the Student Investment Fund. EMR has a weak positive correlation with UTX, meaning it would provide further risk-reduction benefits. Page

6 Emerson Electric Randy Kidder Michael Hooper Other Valuation Measures Graham and Dodd EMR is below the BASELINE in the th Decile of relative valuation. Investors are paying a lower premium for future earnings than 0 % of the investors in the S & P 00. Insider Trading Between March 0 and June 0 Net Insider Trades displayed a selling trend. Since June of 0, Insider s Net Positions have held steady and increased slightly, showing confidence in the company in spite of anticipated difficult economic conditions. Net Insider Purchases (Sales), $, in thousands Net Insider Transactions $0 ($,000) ($,000) ($,000) Dec-0 Mar-0 Jun-0 Sep-0 Dec-0 ($,000) Mar-0 Jun-0 Sep-0 Dec-0 Mar-0 Jun-0 Sep-0 Dec-0 Mar-07 Jun-07 Sep-07 Net Insider Transactions, $, in thousands Dec-07 Mar-08 Jun-08 Sep-08 Piotroski's Financial Fitness Evaluator EMR exceptionally scored the maximum of in this evaluator. The Financial Fitness Evaluator measures the firm against benchmarks in profitability, management of operations, assets, debt and equity, and generation of free cash flow. Other Analyst s Recommendations The mean recommendation has held steady at. for at least the past two weeks indicating a buy, but not a strong buy, signal from analysts. EMR rates a Buy from Standpoint, Longbow, and Deutsche Securities and Outperform from Robert W. Baird, and Credit Suisse. Institutional Ownership Institutional investors own 7% of EMR s shares. Short Selling in EMR s Stock The trend is one of a shrinking volume of short trades which exhibits growing confidence in the future performance of EMR despite an uncertain economic environment. Recommendation EMR earns a Buy recommendation based on: o EMR s proven ability to execute its global growth strategy o DCF 08 price per share intrinsic value of $. and the current undervalued market price, trading in the low to mid $0 price range o A sustainable ROIC> WACC o Current high dividend yield and EMR s -year history of increasing dividends o Strong projected growth in EPS, Free Cash Flow, EVA and MVA Page

7 EMR.xls Valuation and Analysis Model, Page of A B C D E F G H I J K L M N Enter Firm Ticker EMR Enter first financial statement year in cell B Average Manual Total revenue,8, 7,0,,7 Revenue Growth.%.8%.%.%.8% Cost of goods sold,00,0,,, COGS % of Sales.%.%.%.%.%.%.% Gross profit,88,,8 7,8 8, SG&A expense,,8,,0, SG&A % of Sales.0%.0%.8%.%.%.7%.% Research & Development R&D % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Depreciation/Amortization 7 8 D&A % of Sales 0.% 0.% 0.% 0.% 0.% 0.% Interest expense (income), operating 7 8 Inc. Exp. Oper..7%.%.%.0%.0%.% Non-recurring expenses 8 8 Exp. Non-rec.% 0.8% 0.% 0.% 0.% 0.7% Other operating expenses 70 Other exp. 0.8% 0.% 0.% 0.% 0.% 0.% Operating Income,,8,,8,7 Interest income (expense), non-operating Int. inc. non-oper. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Gain (loss) on sale of assets Gain (loss) asset sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Other income, net Other income, net 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Income before tax,,8,,8,7 Income tax Tax rate 8.%.%.8%.%.%.%.0% Income after tax,0,7,,8, Minority interest Minority interest 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Equity in affiliates Equity in affiliates 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% U.S. GAAP adjustment U.S. GAAP adjust. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Net income before extraordinary items,0,7,,8, Extraordinary items, total Extrordinary items Too unpredictable to forecast Net income,7,,8, Total adjustments to net income Adjustments to NI Too unpredictable to forecast Basic weighted average shares Share growth 0.0% -.0% -.% -.8% -.% 0.0% Basic EPS excluding extraordinary items Basic EPS including extraordinary items Diluted weighted average shares Diluted share growth 0.% -0.8% -.% -.% -.% 0.0% Diluted EPS excluding extraordinary items Diluted EPS including extraordinary items Dividends per share -- common stock Gross dividends -- common stock Dividend growth.%.8%.%.7%.% Retained earnings ,, Data Source: Thomson/Reuters values in millions Historical Income Statements Forecasting Percentages

8 EMR.xls Valuation and Analysis Model, Page of O P Q R S T U V W X Y Z Year-by-year revenue growth % 8.00%.00%.00%.00%.00%.00% 7.00%.00%.00% Forecasted Income Statements -- Years Year Total revenue,0 7,0,7,7,0,8,8,,78,7 Cost of goods sold,0 7,,,8,0, 7,8,80,,7 Gross profit 8,8,0,7,,78,0,0, 7,7 8,7 SG&A expense,8,,7,8, 7,07 8, 8,87,,87 Research & Development Depreciation/Amortization Interest expense (income), operating 77 Non-recurring expenses Other operating expenses Operating Income,,708,07,7,,,8,,7 7,0 Interest income (expense), non-operating () (8) () () () () (0) () () (8) Gain (loss) on sale of assets Other income, net Income before tax,,,7,,78,0,,0,,880 Income tax,00,0,,,,,77,,07, Income after tax,,,,8,,,780,08,,7 Minority interest Equity in affiliates U.S. GAAP adjustment Net income before extraordinary items,,,,8,,,780,08,,7 Extraordinary items, total Net income,,,,8,,,780,08,,7 Total adjustments to net income Basic weighted average shares Basic EPS excluding extraordinary items Basic EPS including extraordinary items Diluted weighted average shares Diluted EPS excluding extraordinary items Diluted EPS including extraordinary items Dividends per share -- common stock Gross dividends -- common stock 888,00,,,,,, Retained earnings,,8,,7,8,,,7,8,8

9 EMR.xls Valuation and Analysis Model, Page of AA AB AC AD AE AF AG AH AI AJ AK AL AM AN Enter Firm Ticker EMR values in millions Historical Balance Sheets Forecasting Percentages year Average Manual Assets Cash & equivalents,, 8,008 Cash % of Sales.0% 8.% 7.%.0%.%.8%.0% Short term investments ST Invest. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Receivables, total,0,,,7,0 Receivables % Sales.0% 8.8% 8.8% 8.% 8.% 8.8% Inventory, total,8,70,8,,7 Inventory % of Sales.%.%.%.0%.%.7%.0% Prepaid expenses Pre. Exp. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Other current assets, total 8 70 Other CA % of Sales.%.8%.%.%.%.% Total Current Assets,00,,8 7,0 8,0 Property, plant and equipment (net),,,00,, Net PPE % of Sales.% 8.8% 7.%.0%.% 7.7% Goodwill,,,,0, Goodwill % of Sales.%.7%.7%.% 8.%.8% Intangibles 7 7 Intangibles % of Sales.8%.%.7%.%.%.% Long term investments 7 80 LT Invest. % of Sales.%.%.%.% 0.%.0% Notes receivable -- long term Notes Rec. % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Other long term assets, total,0,0,077, 8 Other LT ass. % Sales 7.%.7%.%.%.8%.% Other assets, total Other assets % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Total assets,, 7,7 8,7,80 Liabilities and Shareholders' Equity Accounts payable,7,,8,0,0 Acts. Payable % Sales.0%.%.%.%.%.7%.0% Payable/accrued Pay/accured % Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Accrued expenses,,,8,, Accrued. Exp. % of Sales.8%.%.%.%.%.% Notes payable/short term debt Notes payable % Sales.8%.8%.%.%.8%.%.% Current portion of LT debt/capital leases Curr. debt % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Other current liabilities 8 0 Other curr liab % Sales 0.8% 0.7%.%.%.%.% Total Current Liabilities,7,,,, Long term debt, total,7,,8,8, LT debt % of Sales LT Debt is manually adjusted Afn in the pro formas Deferred income tax Def. inc. tax % Sales.%.%.%.%.%.% Minority interest 7 Min. Int. % of Sales 0.8% 0.8% 0.8% 0.% 0.8% 0.8% Other liabilities, total 7,0,,80 Other liab. % of Sales.%.%.%.%.7%.% Total Liabilities 8,7,,87,8,08 Preferred stock (redeemable) Preferred stock (unredeemable) Common stock 7 Additonal paid-in capital 87 Retained earnings (accumluated deficit) 8,88,,,, Treasury stock -- common (,) (,0) (,0) (,8) (,) ESOP Debt Guarantee Other equity, total () (88) () 0 The model uses the more conservative diluted common shares Total Shareholders' Equity,0 7, 7,0 8, 8,77 number for total shares outstanding. Total Liabilities and Shareholders' Equity,, 7,7 8,7,80 Diluted weighted average shares Diluted share growth 0.% -0.8% -.% -.% -.% 0.0% Total preferred shares outstanding Preferred share growth

10 EMR.xls Valuation and Analysis Model, Page of AO AP AQ AR AS AT AU AV AW AX AY AZ Year by Year Property, plant and equipment.0%.% 7.0% 8.% 8.0% 8.70% 8.0%.00%.00%.00% Forecasted Balance Sheets -- Years year Assets Cash & equivalents,0,,78,,,7,,77,,08 Short term investments Receivables, total,70,08,0,,7 7, 8, 8,78,, Inventory, total,7,77,7,0,,,70,08,8,7 Prepaid expenses Other current assets, total 77 8,08,,,,,, Total Current Assets,7,,7,7,007,8,7 7,70,0,00 Property, plant and equipment (net),8,,,, 7,8 8, 8,77,0,77 Goodwill 7,8 8,0,7,,,00,7,,77, Intangibles ,0,,8,80, Long term investments ,00 Notes receivable -- long term Other long term assets, total,8,,80,8,8,0,,7,7, Other assets, total Total assets,,,,0,,,00,7,0,8 Liabilities and Shareholders' Equity Accounts payable,7,77,7,0,,,70,08,8,7 Payable/accrued Accrued expenses,,8,,,7,,,8,,7 Notes payable/short term debt,,78,8,00,,,77,8,0,88 Current portion of LT debt/capital leases Other current liabilities Total Current Liabilities 7, 7,7 8,7,,,,,0,,80 Long term debt, total,,,8,8,,,88,,87, Deferred income tax ,0,7,,,0,00,80 Minority interest Other liabilities, total,,7,8,00,,7,,80,000,0 Total Liabilities,,00,8 7,8,7,,8,8,8,7 Preferred stock (redeemable) Preferred stock (unredeemable) Common stock Additonal paid-in capital Retained earnings (accumluated deficit),78,,7 8,,0,7, 7,7 0,, Treasury stock -- common (,) (,) (,) (,) (,) (,) (,) (,) (,) (,) ESOP Debt Guarantee Other equity, total Total Shareholders' Equity,0,8,,707, 8,,, 7,77 0, Total Liabilities and Shareholders' Equity,,,,0,,,00,7,0,8 Total common shares (diluted) Total preferred shares outstanding AFN (interactive with items below) Adjustment to LT Debt (iterate or use Goal Seek), (.8) (8.7) (,.) (,.) Issue Common Stock to Fund AFN Set Balance Sheet Cash Lower to Fund AFN

11 EMR.xls Valuation and Analysis Model, Page of 8 BA BB BC BD BE BF BG BH BI BJ BK BL BM BN BO BP Enter Firm Ticker values in millions EMR Historical Ratios and Valuation Model Forecasted Ratios and Valuation Model -- Years Liquidity Current Quick Net Working Capital to Total Assets Asset Management Days Sales Outstanding Inventory Turnover Fixed Assets Turnover Total Assets Turnover Debt Management Long-Term Debt to Equity Total Debt to Total Assets Times Interest Earned % 7.% N/A %.7% N/A %.8% N/A %.% N/A %.% N/A..0.%.7% %.%..7.0.%.8%...8%.%.0..%.7% %.%.8..% 7.7%.. 7.%.%...%.0%...0% 8.% Profitability Gross Profit Margin.%.%.7%.%.%.%.%.%.%.%.%.%.%.%.% Operating Profit Margin.%.%.%.%.8%.7%.7%.7%.7%.7%.7%.7%.7%.7%.7% Net After-Tax Profit Margin 7.% 8.% 8.%.%.% 8.% 8.% 8.% 8.% 8.% 8.7% 8.8% 8.%.0%.% Total Assets Turnover Return on Assets.% 7.7% 8.%.%.% 8.8% 8.8% 8.7% 8.% 8.7% 8.7% 8.7% 8.8% 8.%.% Equity Multiplier Return on Equity.% 7.%.%.%.%.%.%.7%.% 8.% 8.% 7.%.%.%.% EPS (using diluted shares, excluding extraordinary items) DPS (dividends per share) Valuation Metrics Trend Analysis (NOPAT, EVA, MVA, FCF and Capital in millions) Forecasted Valuation Metrics -- Years NOPAT (net operating profit after tax),0,7,,8,,,,77,0,,,0,0,,7 ROIC (return on invested capital).%.%.%.%.%.% 0.%.% 8.7% 8.% 8.% 8.0% 8.0% 8.0% 8.0% EVA (economic value added) 0 8 8,7,,7,7,80,8,,,,7,88,0 FCF (free cash flow) 7,,7,778,000,8,,87,8,,70,,,7 Weighted Average Cost of Capital.%.%.%.%.%.%.%.%.%.%.% Net Operating Working Capital (NOWC),,,,,7,8,877,,,0,7,87, 7,07 7,8 Operating Long Term Assets,,,00,,,8,,,, 7,8 8, 8,77,0,77 Total Operating Capital,,,,70,088 7, 8,0,,0,8,08,8,, 7, ROIC WACC Spread.8%.%.%.0% 8.% 8.% 7.% 7.78% 7.70% 7.70% 7.70% Valuation (in millions where appropriate) -- through year Long-term Horizon Value Growth Rate (user-supplied).00% PV of Forecasted FCF, discounted at.% $, $,07 $,0 $, $, $,08 $, $8,7 $0,87 $, $, Value of Non-Operating Assets $,008 $,0 $, $,78 $, $, $,7 $, $,77 $, $,08 Total Intrinsic Value of the Firm $, $,7 $,8 $,0 $, $, $7, $0,7 $, $,7 $7,7 Intrinsic Market Value of the Equity $,8 $, $, $, $, $,07 $,8 $,08 $, $0, $8, Per Share Intrinsic Value of the Firm $.0 $. $. $.7 $.0 $8. $. $.0 $70. $7.7 $8.8 MVA (market value added) $, $,7 $7,707 $8, $, $0, $0,8 $, $, $, $,7 Weighted Average Cost of Capital Calculations Capital Asset Pricing Model Item Value Percent Cost Weighted Cost Risk Free Rate.00% ST Debt (from most recent balance sheet).%.% 0.0% Beta. LT Debt (from most recent balance sheet),.%.% 0.% Market Risk Prem..00% MV Equity (look up stock's mkt. cap and enter in cell BB),0 87.0%.%.80% Cost of Equity.% Weighted Average Cost of Capital.%

12 EMR.xls Valuation and Analysis Model, Page of 8 BQ BR BS BT BU BV BW BX BY BZ CA CB CC CD CE CF CG CH In this section we are going to examine historical and forecasted ratios (or "multiples") typically used to value stocks P/CF, Enterprise Value/EBITDA, etc. We first want to compare the historical trends in these ratios to the trends in their forecasted values. If our forecasted multiples are systematically increasing or decreasing our forecasts may be too optimistic or pessimistic, and our forecast assumptions may have to be adjusted. Second, we want to compare our discounted cash flow valuation estimates with those derived from the various multiples. Once again, if there is a large discrepancy between our DCF valuation estimate of the company's stock and the range of values obtained from the various multiples, we may want to adjust our forecast assumptions.. You will need to look up the company's year end stock prices and enter them in the first (historical) years of the "per share value" category. 7. Use the estimated DCF price per share in the forecasted period (link to your forecasted prices in cells BG BP. 8. Market capitalization will be calculated as basic weighted shares x historical year end prices and then forecasted basic weighted shares x DCF forecasted prices.. As with previous calculations, historical multiples use actual historical values and forecasted multiples use forecasted values. Historical Ratios and Valuation Forecasted Ratios and Valuation Inputs E 0E E E E E E E E 7E Per share value (hist. & DCF est.) $8. $. $. $. $. $. $. $.7 $.0 $8. $. $.0 $70. $7.7 $8.8 Market capitalization $, $, $, $, $,7 $, $, $,07 $,80 $, $,0 $, $, $,7 $7, EBITDA $, $,8 $,88 $,0 $,8 $,08 $, $,8 $, $,87 $, $7,0 $7, $7,8 $8, 7 Enterprise Value $7,7 $,77 $, $,87 $, $,8 $, $, $, $,08 $, $7,80 $0, $, $, 8 Multiples Price/Sales Price/EBITDA Price/Free Cash Flow N/A Enterprise Value/EBITDA Price/Earnings Dividend Yield.7%.%.%.0%.87%.%.%.%.%.%.%.%.%.%.% Historical Override Forecasted Stock Prices Based on Historical Multiples -- Years Valuation Estimates Based On: Average w/manual 08E 0E E E E E E E E 7E 7 Price/Sales.7 $.00 $. $. $7.88 $7.07 $8.7 $.80 $. $7. $.0 8 Price/EBITDA.8 $0. $.8 $7. $7. $87. $. $.07 $. $.7 $. Price/Free Cash Flow 7. $.8 $8. $. $. $7.0 $8. $. $. $.78 $. 0 Enterprise Value/EBITDA.08 $7. $7.7 $7. $87. $.7 $. $.7 $.0 $. $. Price/Earnings. $7. $.0 $8. $7. $8.0 $. $. $. $7.0 $.8 Low Price $.8 $8. $. $. $7.0 $8. $.80 $. $7. $.0 High Price $7. $7.7 $7. $87. $.7 $. $.7 $.0 $. $. DCF Price $. $. $.7 $.0 $8. $. $.0 $70. $7.7 $8.8 Price/Sales and Enterprise Value/EBITDA vs. Price Forecasted Per Share Stock Values $0 $0 $ $80 $0 $ $70 $ $0 $0 $0 $80 $0 $ $ $0 $0 $0 $ Price/Sales Enterprise Value/EBITDA DCF Price Low Price DCF Price High Price P/S and Ent. Value/EBITDA DCF Price Forecasted Value Per Share

13 EMR.xls Valuation and Analysis Model, Page 7 of CI CJ CK CL CM CN CO CP CQ CR CS CT CU CV CW CX CY CZ DA DB Economic Value Added Gross Margin Price/Earnings Ratio Price/Earnings Ratio and Dividend Yield Earnings and Dividends Per Share 8% 7% % % % 7 % % % Price/Earnings Ratio Dividend Yield 0% 0% 80% % 0% 0% % % % % 0% 0% Gross Margin Operating Margin Net Margin $,00 $,000 $,00 $,000 $,00 Dividend Yield Gross, Operating and Net Profit Margins Return on Assets, Equity and Invested Capital Oper. and Net Profit Margin ROA, ROE and ROIC NOPAT and Free Cash Flow 70% 0% 0% % 0% % % 0% Return on Assets Return on Equity Return on Invested Capital Economic Value Added & Market Value Added (millions) NOPAT and Free Cash Flow (millions) $,000 $,000 $,000 $,000 $,000 $,000 $7,000 $,000 $,000 Economic Value Added Market Value Added Market Value Added EPS and DPS $7.00 $.00 $.00 $.00 $.00 $.00 $ $0.00 Earnings Per Share Dividends Per Share $,000 $,000 $,000 $,000 $,000 $,000 $0 NOPAT Free Cash Flow