ValuationConrail ValuationValuation in a competitive bidding situationCSX1CSX -- value of synergiesCSX2CSX -- value of synergies plus loss if rival gets itNSNorfolk Southern -- value of synergies plus loss if rival gets it

CSX 1Conrail ValuationRe=Rf+BetaMkt Risk PremCSX Valuation 1Required return15.93%=6.83%+1.37.00%19971998199920002001Gain in Operating Income0188396550567TV w. const growth model at4%4943After tax35%01222573583581PV0911651981710NPV2164.3510774334Shares90.5NPV per share$23.92Pre-merger$71.00Total$94.92

CSX 2Conrail ValuationRe=Rf+BetaMkt Risk PremCSX Valuation 2Required return15.93%=6.83%+1.37.00%Gain19971998199920002001Gain in Operating Income0240521730752TV w. const growth model at4%6556After tax35%01563394754750PV01162172632268NPV2864.4571990447Shares90.5NPV per share$31.65Opportunity Cost19971998199920002001Loss if rival gets target0-66-123-189-196TV w. const growth model at4%-1709After tax35%0-43-80-123-1238PV0-32-51-68-591NPV-742.461870965Shares90.5NPV per share$(8.20)Pre-merger$71.00Gain$31.65Opp cost$8.20Total$110.86

NSConrail ValuationRe=Rf+BetaMkt Risk PremNS Valuation 2Required return15.93%=6.83%+1.37.00%Gain19971998199920002001Gain in Operating Income0231429660680TV w. const growth model at4%5928After tax35%01502794294295PV01121792382051NPV2579.3525628292Shares90.5NPV per share$28.50Opportunity Cost19971998199920002001Loss if rival gets target0-130-232-308-320TV w. const growth model at4%-2790After tax35%0-85-151-200-2021PV0-63-97-111-965NPV-1235.7447991235Shares90.5NPV per share$(13.65)Pre-merger$71.00Gain$28.50Opp cost$13.65Total$113.16