853
EXHIBIT H.12  Costco: Free Cash Flow and Cash Flow to Investors
$ million
Historical
Forecast
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
NOPAT
2,598
2,675
3,098
3,818
4,206
4,593
5,037
5,298
5,609
5,929
6,180
6,451
6,715
6,978
Depreciation
1,255
1,370
1,437
1,492
1,584
1,734
1,852
1,971
2,090
2,207
2,322
2,434
2,544
2,650
Gross cash flow
3,853
4,045
4,535
5,310
5,790
6,328
6,889
7,269
7,699
8,136
8,502
8,886
9,259
9,628
Decrease (increase) in working capital
(962)
1,682
684
449
420
327
334
331
326
320
313
305
297
296
Less: Capital expenditures1
(2,649)
(2,502)
(2,969)
(2,998)
(3,573)
(3,281)
(3,432)
(3,536)
(3,633)
(3,722)
(3,804)
(3,879)
(3,948)
(4,049)
Decrease (increase) in capitalized operating leases
(91)
(208)
28
86
(230)
(179)
(183)
(181)
(178)
(175)
(171)
(167)
(162)
(162)
Decrease (increase) in other assets, net of liabilities
20
66
163
(173)
(10)
(8)
(8)
(8)
(8)
(8)
(8)
(8)
(7)
(7)
Free cash flow
171
3,083
2,441
2,675
2,397
3,186
3,600
3,875
4,206
4,552
4,832
5,137
5,438
5,706
Interest income
41
50
75
126
64
51
38
26
13
—
—
—
—
—
Other income
39
12
46
52
—
—
—
—
—
—
—
—
—
—
Taxes related to nonoperating accounts
48
49
32
15
74
85
93
101
109
117
122
127
132
138
Other nonoperating taxes
77
37
45
92
—
—
—
—
—
—
—
—
—
—
Decrease (increase) in excess cash
1,740
(844)
(1,229)
(1,962)
1,278
1,278
1,278
1,278
1,278
—
—
—
—
—
Decrease (Increase) in tax credit carryforward
0
—
—
(65)
—
—
—
—
—
—
—
—
—
—
Unexplained foreign-currency translation2
(226)
99
(173)
60
—
—
—
—
—
—
—
—
—
—
Cash flow to investors
1,890
2,486
1,238
993
3,813
4,601
5,009
5,280
5,606
4,669
4,954
5,264
5,570
5,844
1 Capital expenditures are reported on the statement of cash flows.
2 Foreign-currency translation adjustment, less the portion estimated in the change of property, plant, and equipment; detailed in Exhibit 11.14.

854
EXHIBIT H.13  Costco: Reconciliation of Cash Flow to Investors
$ million
Historical
 Forecast
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Interest expense
133
134
159
150
277
302
315
327
340
354
368
382
397
413
Operating lease interest
75
57
74
91
88
96
103
109
116
122
129
135
141
147
Decrease (increase) in long-term debt
908
(1,504)
65
(270)
(648)
(333)
(327)
(341)
(351)
(361)
(378)
(395)
(413)
(432)
Decrease (increase) in capitalized operating leases
(91)
(208)
28
86
(230)
(179)
(183)
(181)
(178)
(175)
(171)
(167)
(162)
(162)
Cash flow to debt and debt equivalents
1,025
(1,521)
326
57
(513)
(114)
(93)
(86)
(73)
(60)
(54)
(45)
(38)
(34)
Nonoperating deferred income taxes
(44)
(45)
(58)
(50)
—
—
—
—
—
—
—
—
—
—
Shares issued for stock-based compensation, net1
(313)
(353)
(330)
(326)
(357)
(381)
(406)
(430)
(454)
(478)
(501)
(524)
(546)
(567)
Repurchases of common stock
477
473
322
247
2,128
2,315
2,463
2,577
2,744
1,649
1,782
1,942
2,104
2,236
Dividends
746
3,945
936
1,057
2,505
2,728
2,989
3,160
3,327
3,491
3,657
3,818
3,974
4,130
Payments to (investments in) noncontrolling interests2
(1)
(13)
42
8
49
53
56
59
63
66
69
72
75
78
Cash flow to equity and equity equivalents
865
4,007
912
936
4,326
4,715
5,102
5,365
5,679
4,729
5,008
5,309
5,608
5,878
Cash flow to investors
1,890
2,486
1,238
993
3,813
4,601
5,009
5,280
5,606
4,669
4,954
5,264
5,570
5,844
1 Includes stock-based compensation, stock options exercised, net of the release of vested restricted stock units.
2 Equals net income to nonconsolidated interests minus (plus) the increase (decrease) in noncontrolling interests.

Appendix H  855
EXHIBIT H.14  Costco: Continuing Value
$ million
Key inputs
Projected NOPAT in final forecast year
7,261.7
Continuing Value
NOPAT
1-
g
RONIC 
WACC-g
t
t+1
=




NOPAT growth rate in perpetuity (g)
4.0%
Return on new invested capital (RONIC)
22.0%
Weighted average cost of capital (WACC)
8.0%
= 148,301.9
Note: Continuing value of $148,301.9 million is calculated from unrounded data. Rounded inputs calculate to $148,534.8 million.
EXHIBIT H.15  Costco: Weighted Average Cost of Capital
%
Source of 
capital
Target 
proportion of 
total capital
Cost of 
capital
Marginal 
tax rate
After-tax 
cost of 
capital
Contribution to 
weighted 
average
Debt
10.4
4.9
24.6
3.7
0.4
Equity
89.6
8.5
8.5
7.6
WACC
100.0
8.0

856  Appendix H
EXHIBIT H.16  Costco: Enterprise DCF Valuation
$ million, except where noted
Forecast year
Free cash 
flow (FCF)
Discount 
factor at 8.0%
Present 
value of FCF
2020
2,397
0.926
2,219
2021
3,186
0.857
2,731
2022
3,600
0.794
2,857
2023
3,875
0.735
2,848
2024
4,206
0.680
2,862
2025
4,552
0.630
2,868
2026
4,832
0.583
2,819
2027
5,137
0.540
2,775
2028
5,438
0.500
2,719
2029
5,706
0.463
2,642
Continuing value
148,302
0.463
68,662
Present value of cash flow
96,002
Midyear adjustment factor
1.039
Value of operations
99,770
Value of excess cash
6,390
Value of foreign tax credit carryforward
65
Enterprise value
106,225
Less: Value of debt and capital leases
(7,244)
Less: Value of capitalized operating leases
(2,414)
Less: Value of noncontrolling interests
(341)
Equity value
96,226
Shares outstanding, millions
440
Equity value
218.80