VALUATION REPORT

International Flavors & Fragrance Inc.

Group 8: Phuong Bui Omar Laalej Pauline Tillier Ngoc Trinh

FIN332001 InvestmentValuation Prof.EdwardNelling June1,2008

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TABLEOFCONTENTS
I.Summary...1 II.FundamentalAnalysis.2 III.HistoricalPerformanceAnalysis....5 IV.MultipleValuations.7 V.TechnicalAnalysis..8 VI.DiscountedCashFlowValuation...11 VII.Bibliography.15

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InternationalFlavors&FragranceInc.(NYSE:IFF) ClosingPriceasof5/30/2008:$41.96 MarketCapital:$3.38billion Recommendation:Buy

SUMMARY
InternationalFlavors&FragrancesInc.isaproduceranddistributorofartificialflagrancesand flavors.Itsproductsaresoldmostlytothemanufacturersofperfumes,cosmetics,soaps,andpersonal careandhouseholdproductsaswellasmanufacturersofpreparedfoods,beverages,pharmaceuticals, andconfectioneryproducts ThefirmsmaincompetitorsareGivaudan,DaniscoA/S,andFirmenich.Althoughthesefirmsare notlistedintheUSmarketstockexchange,theyareanimportantoftheflagrancesandflavorsindustry. Indeed,Givaudanistheworldslargestscentproducerwith25%ofglobalmarketshare.DaniscoA/S competeswithIFFinthefoodingredientssector.Lastbutnotleast,Firmenichisamongtheworld leadersinflagrancesandflavorsmanufacturerswith15%oftheglobalmarketshare. Amongthemostimportantdevelopmentsrecentlyobserved,wenoticeastrongerdemandin LatinAmericaandAsia.Inadditiontoaweakperformanceoftheflagrancesectorlately,IFFcontinues todevelopitseverexpandingproductmixwhichfocusesonhighmarginproducts.Moreover,IFFis finishingitsacceleratedsharerepurchaseprogram(ASRP)whichhasalreadyresultedina10million sharesreductionaccordingtothemostrecentreportfromValueline. IFFhasobservedanimportantdealofgrowthinthepastcoupleofyears.Infact,froman8.95% growthinsalesin2007toa14.40%growthinearningspershare,earningshavebeengrowinginan exponentialfashion.Althoughsmallerthanthepreviousperiod,wealsonoteaconsiderablegrowthof thefirmsnetincomewithanincreaseof9.11%in2007.Inthesamemanner,thefirmsgrossmargin grewbutsloweddownin2007asopposedto2006.Aftertheanalysisoftheevolutionofgrossmargin in2007,weunderstandthatIFFsucceededinloweringthecostofproductionofitsproductsorin increasingtheirprice.Wealsobelievethattheslowingfacetofthe2007growthwasduetotheone timeadjustmentsmadebymanagementtoemphasizecostsavingsinthenearfuture. WithacurrentP/Eratioof14.88andenterprisevalue/EBITDAmultipleof10.05,IFFsequityvalue andfirmvalueareworth$3577.00millionand$4523.00millionrespectively.Aftercomparingthedata obtainedfrommultiplemethods(averageandmedianmultiples)usingcomparablefirmsmultiples,IFFs firmvalueisconsistent.However,IFFsmarketequityvalueiscurrentlyundervaluedbecauseitisless thanthevalueweobtainedfromthemultiplemethods.Therefore,ouranalystsbelievethat InternationalFlavors&FragrancesIn.isactuallyundervalued. Consideringallthefactorsanddatameasuredanddiscussedinourvaluationreport,we recommendabuypositionforthisfirm.Infact,thefirmsintrinsicvalueishigherthanthemarketprice andtheexpectedreturnissignificantlyhigherthantherequiredreturn.Fromalltheperspectives,we stronglyrecommendabuyforthisstock. 1

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I.FUNDAMENTALANALYSIS
CompanysBusiness
InternationalFlavors&FragrancesInc.(IFF)isaworldleadingcreatorandmanufacturerof artificialfragrancesandflavors.IFFproductsareorganizedinto2units:flavorandfragrancebusinesses. Flavorcompoundcontributes44%inthecompanystotalsalesin2007.Thebalancecomesfrom fragrancecompoundwhichdividedinto3categories:functionalfragrances,finefragranceandbeauty careingredients.IFFsproductsaresoldmostlytothemanufacturersofperfumes,cosmetics,soaps,and personalcareandhouseholdproductsaswellasmanufacturersofpreparedfoods,beverages, pharmaceuticals,andconfectioneryproductssothattheseproducerscanimpartandimproveIFFs compoundstocreatecustomerendproducts.Therefore,despiteitsglobalscalebusiness,IFFishardly heardbyusedendcustomers. IFFsheadquarterislocatedinNewYorkCity,NewYork,USAbutthecompanymaintains manufacturingfacilitiesaswellassalesanddistributionfacilitiesin31countrieswiththemajor manufacturingfacilitieslocatedintheUnitedStates,Europe,LatinAmerica,andemergingAsia.The companyhasmorethan5,300employeesgloballywith92perfumersand72flavorists. Thesizeoftheglobalmarketforflavorandfragranceisdifficulttodeterminebecauseofthe highlyfragmentedcharacteristicsoftheindustrybasedongeographyandproductlines,thelimited numberofpubliclytradedcompanies,andinsufficientmarketinformationindevelopingcountries. However,accordingtoanalyst,thecompanyisthesecondlargestplayerintheworldwithnearly20% marketshare,whileGivaudanthenumberoneplayerhasapproximately25%oftheglobalmarket.More than70%ofIFFssalescamefrominternationalmarketin2007.Thecompanycontinuestofocusonnew productsandproductdevelopment;IFFspentapproximately9%ofsalesannuallytoR&Din2005,2006 and2007.

BriefHistory
ThehistoryofIFFbeganin1929whenDutchimmigrantandperfumerA.L.vanAmeringenand WilliamHaeblerformedafragrancecompany,vanAmeringenHaebler,inNewYorkCity.Notuntil1953, thecompanyproduceditfirstbigcosmetichitwithEsteLauder,andfromthaton,continuesto producemostofEsteLauder'sfragrances.In1958,vanAmeringenHaeblerchangeditsnameto InternationalFlavors&FragrancesafteritacquiredPolak&Schwarz. In1963,IFFexpandedtoglobalmarketundertheinstructionofthecompanysnewCEOHenry Walter.ThiscreatedagreatercompetitionbetweenIFFandsomefamousFrenchperfumes.Under Waltersdirection,IFFnotonlymadeproductsforconsumergoodsbutalsoexperimentedtocreatenew linesofproductsforotherindustriessuchashouseholdandpharmaceutical.Since1988,IFFdeveloped fragrancesforsomeprestigiousbrands.In1991,IFFboughtWisconsinbasedAuroTechandfocused moreondairyflavorproducts.From1991to1996,IFFenjoyeditssuccessinbusinessandcontinued expandingitsbusinessinChina. From1997to1999,IFFssalesandprofitswerehitbyeconomiccrisisandturmoilaroundthe world,aswellasunfavorablecurrencyexchange. 2

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In2000,IFFimplementedtwobigacquisitionsofLaboratoireMoniqueRemy(France)anditsrival fragranceandflavormakerBushBoakeAllen.Themergercausedawideshutdownofmanufacturing, distribution,andsalesfacilitiesworldwideasaresultofbusinesssynergies.Thecompanystartedtosell itsfacilitieswhichformulatefruitandvegetablepreparationaroundtheworldandfocusondeveloping anaturalingredientsoperationaswellasanewcoolingtechnologyusedinthefood,beverage,and pharmaceuticalindustries.

PrimaryCompetitors
IFFsprimarycompetitorsarethesefirmsbelow: Givaudan DaniscoA/S Firmenich Amongthat,Givaudan(Switzerland)istheworldslargestscentproducerwith25%ofglobal marketshare.GivaudancompeteswithIFFinalmosteveryproductline:flavorandfragrance. DaniscoA/SheadquarterinDenmarkisoneoftheworldslargestproducersoffoodingredients. Itsproductsaresoldtofoodmanufacturerworldwide. Firmenich(Switzerland)isoneamongtheworldleadersinflavorsandfragrancesmanufacturers alongwithIFFandGivaudanwith15%ofmarketshare.In2007,Firmenichboughttheflavorsbusiness ofDanisco.ThecompanyisownedandoperatedbytheFirmenichssincethelate19thcentury. Infact,allofthesefirmsareeitherprivatelyheldorarenotlistedintheUSmarketstock exchange.Therefore,therewasnotenoughinformationanddatatocomparethesefirmstoIFF.

ComparablePubliclyTradedFirms
BelowisthelistofIFFcomparablefirmswhicharemembersofspecialtychemicalsindustryand whoseproductlines(someorall)aresimilartothoseofIFF: SensientTechnologiesCorp.(SXT):togetherwithitssubsidiariesmanufactureandmarketcolors, flavors,andfragrancesworldwide SigmaAldrichCorp.(SIAL):engagesinthedevelopment,manufacture,anddistributionofvarious biochemicalandorganicchemicalsworldwide AlbemarleCorp.(ALB):develops,manufactures,andmarketsengineeredspecialtychemicals.It operatesinthreesegments:PolymerAdditives,Catalysts,andFineChemicals. LubrizolCorp.(LZ):producesandsuppliestechnologiesthatimprovetheperformanceofits customer'sproductsinthetransportation,industrial,andconsumermarketsworldwide HBFullerCo.(FUL):anditssubsidiariesmanufactureandmarketadhesivesandspecialtychemical productsworldwide McCormick&Company,Inc.(MKC):aspecialtyfoodcompany,engagesinthemanufacture, marketing,anddistributionofflavorproductsandotherspecialtyfoodproductstothefoodindustry worldwide 3

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RecentDevelopments:
Towardtheendof2007,IFFsflavorbusinessreceivedstrongerdemandsinLatinAmericaand greatAsia.However,theFragrancebusinessexperiencedaweakerperformancerecently,especiallyin NorthAmericaandEuropewhichisinfluencedbytheconsumerspendingshrinkingduetotheoverall economicslowdown.Additionally,increaseinfragranceingredientsworsenstheresultinthissegment. Atthesametime,IFFcontinuesitsdevelopmentofeverexpandingproductmix,focusingonhigh marginproducts.Thecompanybelievesthatthispromisingprogramwillmakeapositiveeffectinsale andbenefitmargin.However,inthenearfuture,itisforeseenthatthemarginwilldecreasebecauseof lowersellingpricesandcostsrelatedinthescalingupeffortsatitsfacilityinChina. Also,IFFisfinishingupitsacceleratedsharerepurchaseprogram(ASRP)whichstartedlast SeptemberandexpectedtoendduringthemiddleofJune.AccordingtothesourcefromValueline,the ASRPalreadyresultedina10millionsharesreduction. Insummary,withthesolidperformanceinflavordivisionandbettercostcontrol,analysts estimatethatthecompanywillwidenitsmarginsandriseitsearningby10%inthenextyear.

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II.HISTORICALPERFORMANCEANALYSIS
ProfitMargin,ROIC,HistoricalSalesandEarningGrowth
Overthelastthreeyears,profitmargins,returnoninvestedcapital,historicalsales,aswellas earningspershareallgrew. Sales($thousands) GrowthinSales NetIncome GrowthinNetIncome EPS GrowthinEPS GrossMargin GrowthinGM ProfitMargin GrowthinProfitMargin ROIC GrowthinROIC 2005 1,993,393 193,066 2.06 824,401 9.69% 9.34% 2006 2,095,390 5.12% 226,500 17.32% 2.50 21.36% 884,131 7.25% 10.81% 11.61% 10.87% 16.37% 2007 2,276,638 8.65% 247,128 9.11% 2.86 14.40% 952,214 7.70% 10.85% 0.42% 11.39% 4.72%

Butasyoucanseeintheabovetable,besidessalesandgrossmargin,thegrowthofalltheitems listedslowedbetween2006and2007. Asshownbytheprogressionofgrossmargin,IFFsucceededinloweringthecostofproductionof itsproductsorinincreasingtheirprice.Butthatwasnotsufficienttokeepasustainablegrowthinnet income,earningspershare,profitmargin,andreturnoninvestedcapital. The gap between 2006 and 2007 growth is pretty noticeable for profit margin and return in invested capital.The2007profitmarginsuggested thatnetincomewasgrowingbutat aslowerpace whilesaleswereexpanding.Inaword,theprofitgeneratedbya$1salegrewlessin2007thanin2006. Netincomegrowthwasslowingbecauseoftherecordofacurtailmentlossthatresultedfromachange totheUSdefinedbenefitpensionplan.Itissaidthatthe2007pensioncurtailmentchargewillresultin $4 million annual cost savings beginning in 2008. Therefore, EPS, profit margin, and ROIC all three includingEBIT(ornetincome)wereaffectedbytheonetimeadjustmentinthattheyweregrowingbut ataslowerpace. 5

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In 2006, the company posted strong results. Net income increased by 17.32% from 2005. EPS increased by 21.36% from 2005. Back in 2005, the company recorded $23 million restructuring costs reflecting employeeseparation expenses as the company closed its European fruit preparations businessunit.Anadditional$2millionwasrecordedin2006.Accordingtothemanagers,suchstrategy willleadtoannualizedsavingsof$16to$18million. Toconcludeontheabovefinancialresults,theywerestrongandgrowing.Theslowingaspectof the2007growthwasonlyduetoonetimeadjustmentsthatwillallowcostsavingsinthecomingyears.

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III.MULTIPLEVALUATIONS
AccordingtoYahoofinanceasofMay31,2008,IFFscurrentP/Eratiois14.88andenterprise value/EBITDAmultipleis10.05.Withthecompanynetincomeof$240.39millionandEBITDAof$450.05 millionin2007,IFFsequityvalueandfirmvalueareworth$3577.00millionand$4523.00million respectively. IFF P/E 12.41 EV/EBITDA 10.05 NI($MM) 240.39 EBITDA ($MM) 450.05 EquityValue ($MM) 3577.00 FirmValue ($MM) 4523.00

WecomparedIFFwithitscomparablefirmbycalculatingtheaverageandmedianofthe comparablefirms.BelowisthedatathatweobtainedfromIFFscomparablefirms: Ticker SXT SIAL ALB LZ FUL MKC Average Median P/E 18.41 24.29 18.23 13.71 15 20.89 18.42 18.32 EV/EBITDA 10.27 13.7 11.29 7.69 7.01 11.63 10.27 10.78

WeappliedtheaverageandmedianmultiplesofcomparablefirmstothedenominatorofIFF,we gottheIFFequityvalueandfirmvalueasbelow: EquityValue Averagemultiple Medianmultiple $4428.38 $4403.94 FirmValue $4619.76 $4861.54 Unit:inmillion Comparingtothedataobtainedfrommultiplemethodsusingcomparablefirmsmultiples,IFFs firmvalueisconsistent.However,IFFsmarketequityvalueiscurrentlyundervaluedbecauseitisless thanthevalueweobtainedfromthemultiplemethods. ThisresultsuggeststhatIFFiscurrentlyundervalued. 7

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IV.TECHNICALANALYSIS
RecentTrendsinDividends
IFFsdividendspersharewere$.86,$.74and$.72in2007,2006and2005respectively.InOctober 2007,thecompanyannouncedtoincreasethequarterlydividendof10%from$.21inJuly2007to$.23. ThetrendinIFFsdividendisupward.Thefirmcurrentlyintendstopayapproximately3035%of yearlyearningsthroughdividend.However,thereisnoassurancethatthefirmwillcontinuethistrend inthefutureduetovariousfactorsofvolatileeconomy.

RecentTrendsinStockPriceandVolumeBehavior

SinceOctober2007,IFFstockpricefacesadownwardtrend.Thecompanypostsstrongbut underexpectationsresultssinceQ32007.IFFisdefinitelybeinghurtbytheslowdownintheUS economy,highrestructuringcharges,pricingpressuresfromlargeretailers,aswellashighrawmaterials costs. OnJanuary30,2008,IFFreportedyearend2007results.Astheydidnotmeettheexpectations, theresultspushedIFFstockpricedownby8.7%betweentheopeningandtheclosingofthestock marketonthatday.3.3millionIFFsharesweretradedduringthatday,and3.7millionshareswere tradedthefollowingday. OnMay1,2008,IFFreleaseditsQ12008results.Q12008profitdroppedasaresultofdecreasing fragrancessales.FragrancessalesinNorthAmericawereverylowandthecompanyengagedinashiftin productmix.Onthatsameday,thefirmsstockpricedecreasedby7.0%betweentheopeningandthe closingofthestockmarket. 8

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ComparisonoftheStockPriceBehaviorvs.ThatofItsCompetitorsandtheS&P500

Asshownbytheabovetwographs,IFFbasicallyfollowstheperformanceoftheS&P500,orthe market.IFFperformedbetterthanthemarketfromMay2007toNovember2007,andperformed worsethanthemarketfromDecember2007totoday.Inotherwords,IFFiscorrelatedtothemarket andso,affectedbythecurrenteconomicsituation. MKCismorevolatilethanIFF.MKCexperiencestheoppositeasIFF:theS&P500prevailedover MKCfromMaytoNovember2007,andthestockbeattheS&P500afterNovember2007. SXTseemstoperformwaybetterthanIFF,MKC,andtheS&P500overthelastmonthsasit experiencedapositivestockpricegrowthwhenIFF,MKC,andtheS&P500experiencedanegativestock pricegrowth.

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SensitivityAnalysisonLongTermGrowthandWACC
Sensitivity of Intrinsic Value to Changes in WACC and LT Growth Rate
140 120 100 80 60 40 20 0 -30% -20% -10% Base Case Change 10% 20% 30% Growth Rate WACC

OurstockvaluationismoresensitivetoachangeinWACCthaninlongtermgrowthrateasthe curverepresentinghowtheintrinsicvalueisaffectedbyachangeinWACCissteeperthanthecurve representinghowtheintrinsicvalueisaffectedbyachangeinlongtermgrowthrate. OurrecommendationwouldchangefrombuytosellifweunderestimatedtheWACCbyaround 12.62%ormore,whichmeansiftheWACCwasactually8.6%ormore.Indeed,12.62%isthepointat whichtheintrinsicvaluefallsbelowthecurrentmarketpriceofthestock. However,ourrecommendationwillstaythesameevenifweunderoroverestimatedthelong termgrowthrateby30%orless.Ourrecommendationwouldchangefrombuytosellifwe overestimatedthelongtermgrowthratebyaround39.75%,whichmeansifthelongtermgrowthrate wasactually1.81%orless.

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V.DISCOUNTEDCASHFLOWVALUATION
To evaluate International Flavors & Flagrances Inc. (IFF), we adopted the discounted cash flow (DCF)approach.Belowarethefirmactualfreecashflows(FCF)forthemostrecenttwoyears: NOPLAT Depreciation CAPEX ChangeinNWC FCF 145,838 240,165 275,700 80,194 36,258 19,831 93,433 58,282 65,614 91,928 89,733 82,788 227,537 244,972 278,357 2005 2006 2007

EstimationofActualFreeCashFlowfortheMostRecent2Years
Ourfirststepincomputingthe FCFwastofindthe earningsbeforeinterest andtaxes (EBIT).In 2005, we observed an unusual number named in the income statement as non recurring expense whichreducednoticeablytheEBIT.Fortheaccuracyofouranalysis,wedecidedtoaddit backtothe EBIT.Asaresult,from2005to2007,theoperatingmarginwasaveraging16%. NOPLATistheresultoftheadjustedEBITreducedbythetaxamount.Accordingtothelastannual report,theloweffectivetaxratein2007waslargelytheresultofagreaterpercentageofconsolidated pretaxearningsinlowertaxjurisdictions. Thedepreciationexpenseandthecapitalexpenditures(CAPEX)weredirectlytakenfromthecash flowstatement.Aswecannotice,IFFmadesignificantinvestmentsin2005thatwereprimarilyduetoa market expansion in emerging countries such as Brazil, Russia, India and China. From 2003 to 2005, demandfor consumer goodsgrewfourtimesfasterinthoseregionsthaninthedevelopedcountries. Sincethen,CAPEXreturnedtoitspreviouslevelbefore2005. Finally,thechangeinworkingcapitalisthedifferencebetweenthechangeincurrentassetsand currentliabilities.WecannotethatNWCisdecliningdramaticallywhichisunusualforagrowingfirm. Overthepasttwoyears,whileIFFreduceditsaccountsreceivableandshortterminvestments,accounts payableandothercurrentliabilitieswereincreasing. Givenallthisinformation,wecomputedtheactualfreecashflowsforthemostrecenttwoyears.

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AssumptionsRegardingtheGrowthofFreeCashFlowintheFuture
We believed it was pertinent to build our assumptions regarding FCF over the next five years. SinceIFFhasmaintainedastablegrowthrateforthepastyears,wedecidedthatashortexplicitforecast periodwassufficientforouranalysis.Thenumbersinredhavebeenforecasted. Year Growth Revenues EBIT Nonrecurring Operatingmargin AdjustedEBIT Interestexpense Pretaxinc Tax Taxrate Netincome 1993393 270144 20000 0.15 290144 23956 246188 53122 0.22 193066 0.16 338831 25549 313282 86782 0.28 226500 2005 2006 0.05 2095390 338831 0.16 370219 41535 328684 81556 0.25 247128 2007 0.09 2008 0.07 2009 0.06 2010 0.05 2011 0.05 2012 0.05

2276638 2436003 2582163 2711271 2846835 2989176 370219 0.13 316680 37382 279299 78204 0.28 201095 0.13 335681 37382 298299 83524 0.28 214775 0.14 379578 37382 342196 95815 0.28 246381 0.14 398557 37382 361175 101129 0.28 260046 0.15 448376 37382 410994 115078 0.28 295916

From 20052006 and 20062007, the companys revenues grew by 5% and 9% respectively. The high growth in 2007 mainly came from a reorganization of the enterprise into two business units, FlavorsandFragrances,whichincreasedfocus,alignmentandaccountabilityacrosstheorganization.In the next five years, we assume that IFFs growth rate will slightly slow down due to the general downturnoftheU.S.economy,currencyfluctuations,andcompetition.However,sinceIFFoperateson theinternationallevelandthedepreciationoftheDollarmakesexportedgoodscheaper,webelievethe firmwillbeabletomaintainagrowthrateof5%. Over the past two years, the operating margin was averaging 16%. However, with the expectations of increase in prices and reduction in availability of raw materials, we estimated the operating margin to drop to 13% in 2008 and 2009, and then slowly return to its normal pace. By multiplyingtheoperatingmarginbytherevenues,weobtaintheadjustedEBITforthenextfiveyears. Wedecidedtomaintainataxrateof28%.Aswesaidpreviously,thelowtaxratein2007wasthe resultofagreaterpercentageofconsolidatedpretaxearningsinlowertaxjurisdictionsbutshouldhave been28%.Theproductofthetaxrateandpretaxincomegivesusthetaxamountthatwedeductfrom theEBTtoobtainnetincome. 12

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BelowareIFFsFCFfortheperiodofeightyears:

NOPLAT Depreciation CAPEX ChangeinNWC FCF

2005

2006

2007

2008

2009

2010

2011

2012

227,537 244,972 278,357 228,010 241,690 273,296 286,961 322,831 91,928 93,433 80,194 89,733 58,282 36,258 82,788 65,614 19,831 82,000 64,000 20,000 85,000 67,000 25,000 87,000 70,000 25,000 89,000 75,000 30,000 90,000 80,000 30,000

145,838 240,165 275,700 226,010 234,690 265,296 270,961 302,831

NOPLAT is the result of our estimated EBIT reduced by the tax amount. We can note that depreciation,reflectingthedecliningvalueofanasset,ishigherthantheinvestmentsincapital:thisisa signofinefficiency. WeforecastedCAPEXtodeclinein2008duetoeconomicrecessionandfearofoverproduction. Then,sinceIFFisagrowingfirmandtheeconomyislikelytorecovergradually,webelievedNWCand CAPEXwillincreaseovertime,aswellasdepreciation,afunctionofCAPEX

EstimationoftheFirmsWeightedAverageCostofCapital
StockPrice Sharesoutstanding EquityValue B Rf MPR KE Equityweight 42.10 80,500,000 3,389,050 DebtValue 0.9 4.3% 5.0% Tax 8.8% KD 0.74 DebtWeight WACC=7.63% 28% 6.00% 0.26 1,212,641

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Toestimatethecostofequity,weusedtheCAPMformulawithafirmsbetaof0.9,ariskfreerate of4.3%,andamarketriskpremiumof5%toobtainacostofequityequalto8.8%.Themarketvalueof equitywascalculatedbymultiplyingtheamountofsharesoutstandingbythecurrentstockprice. Asforthecostofdebt,itwasprovidedinthecompanysfinancialreport.Sincewewereunableto findtheyieldtomaturityofalldebtsfinancing,weassumedforourprojectthatthefirmsmarketvalue of debt equaled its book value. After computing the weighted average of all the longterm debts, we obtainedacostofdebtof6%.Weestimatedtheforwardtaxratetoaverage28%. Basedonthisinformation,weestimatetheWACCofIFFtobe7.63%.

EstimationoftheFirmsStockPrice
GiventheFCFestimationsforthenextfiveyears,alongtermgrowthof3%andaWACCof7.63%, wefoundanenterprisevalueof5,696,082dollars.Bysubtractingthevalueofdebttothatnumberand dividingbythenumberofsharesoutstanding,weobtainastockvalueof55.69dollars,or13.59dollars morethanIFFscurrentprice.

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BIBLIOGRAPHY:
DrexellibraryValueline IFF2008financialreport:

http://library.corporateir.net/library/65/657/65743/items/282120/IFF2008AnnualReport.pdf Yahoofinancewebsite:www.finance.yahoo.com www.reuteres.com

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