3. TABLE OF CONTENTS
GENERAL DYNAMICS 11
COMPANY HISTORY 15
PRODUCTS AND COMPETITION 17
MAJORPRODUCTS 17
COMBAT SYSTEMS 18
MARINE SYSTEMS 19
INFORMATION SYSTEMS AND TECHNOLOGY 20
AEROSPACE 21
MAJOR COST COMPONENTS 22
CUSTOMERS 22
COMPETITORS 22
MARKET SHARE DATA 23
DOMINATE COMPANY IN THE INDUSTRY 23
CORPORATE CONTROL 24
MANAGEMENT TEAM 24
SHARE ONWERSHIP AND COMPENSATION 26
EXECUTIVE COMPENSATION PLANS 26
BOARD MEMBERS 29
STOCK INSIDER ANALYSIS 31
THE FUTURE 33
ANALYST REPORT 33
ANALYST EARNINGS AND SALES ESTIMATES 33
ANALYST RECOMMENDATIONS 34
EXPERT FORECAST 35
PERSONAL FORECAST (GROUPS FORECAST) 36
STOCK PRICE PERFORMANCE 41
PRICEPERFORMANCE 41
COMPETITORS 41
AEROSPACE AND DEFENSE INDEX/ MARKET 42
ABSOLUTE PERFORMANCE 43

4. PERFORMANCE CONCLUSION 45
FINANCIAL PERFORMANCE 46
GROWTH PERFORMANCE 46
REVENUE 46
GROSS MARGIN 47
EBITDA 48
DIVIDEND GROWTH 48
SUSTAINABLE GROWTH 49
FINANCIAL PERFORMANCE 50
FINANCIAL CONDITION RATIOS 50
PROFITABILITY RATIOS 51
MANAGEMENT EFFECTIVENESS RATIOS 52
ASSEST MANAGEMENT RATIOS 52
DUPONT ANALYSIS 53
GENERAL DYNAMICS 53
COMPETITORS 54
INDUSTRY 55
ALTMAN’S Z-SCORE ANALYSIS 56
GENERAL DYNAMICS 56
COMPETITORS 57
INDUSTRY 58
COST OF CAPTIAL, CAPITAL STRUCTURE ANALYSIS AND DISTRIBUTION 62
DEBT 62
RELEVANT COST OF DEBT 62
DEBT RATIOS 63
EXTERNAL EQUITY 68
RELEVANT COST OF EXTERNAL EQUITY 68
UNLEVERED AND RELEVERED BETA 70
INTERNAL COST OF EQUITY 72
RELEVANT COST OF INTERNAL EQUITY 72
CAPTIAL STRUCTURE 75
GENERAL DYNAMICS CAPITAL & STRUCURE 75
COST OF CAPITAL 77
WACC 77
SECTION 1: FORECAST PARAMETERS 81
ASSUMPTIONS 81

5. ECONOMIC OUTLOOK 81
DEFENSE OUTLOOK 81
AEROSPACE OUTLOOK 82
SECTION 2: PRO FORMA FINANCIAL STATEMENTS 83
RATIOS TO CALCULATE OPERATING PROFIT 83
SALES GROWTH RATE 83
COGS/SALES 84
SGA/SALES 85
DEPRECIATION/NET PPE 85
RATIOS TO CALCULATE OPERATING CAPITAL 86
CASH/SALES 86
INVENTORY/SALES 86
ACCTS REC/SALES 87
OTHER SHORT TERM OPERATING ASSETS/SALES 87
NET PPE/SALES 88
OTHER LONG TERM OPERATING ASSETTS/SALES 88
ACCOUNTS PAYABLE/SALES 89
ACCRUALS/SALES 89
OTHER CURRENT LIABILITIES/SALES 90
RATIOS TO CALCULATE OPERATING TAXES 90
DEFERRED TAXES/NET PPE 90
AVERAGE/MARGINAL TAX RATE 91
DIVIDEND AND DEBT RATIOS 91
DIVIDEND POLICY: GROWTH RATE 91
LONG TERM DEBT/MARKET VALUE OF THE FIRM 92
RATIOS TO CALCULATE REST OF INCOME STATEMENT AND BALANCE SHEET 92
FORECASTED FINANCIAL STATEMENTS 92
FORECASTED INCOME STATEMENTS 92
FORECASTED BALANCE SHEETS 94
SECTIOIN 3: PRO FORMA RATIO ANALYSIS, DUPONT AND ALTMAN Z-SCORE 95
PROFITABILITY RATIOS 95
OPERATING MARGIN 96
PROFIT MARGIN 96
ROIC 96
LIQUIDITY RATIOS 97
CASH RATIO 97
QUICK RATIO 97
CURRENT RATIO 98

6. LEVERAGE RATIOS 98
DEBT/EQUITY: 98
INTEREST COVERAGE RATIO 98
EFFICIENCY RATIOS 99
INVENTORY TURNOVER 99
ACCOUNTS RECEIVABLES TURNOVER 99
ASSET TURNOVER 100
MARKET VALUE RATIOS 100
PRICE TO EARNINGS 100
MARKET TO BOOK 101
EARNINGS PER SHARE 101
DUPONT ANALYSIS 101
ALTMAN’S Z-SCORE FORECAST 103
FORMULA, COMPONENTS & INDICATORS 103
FORECASTED Z SCORE 104
VALUATION METHODS 111
ENTITY VALUATION 111
KEY DRIVERS OF ENTITY VALUATION 112
ADJUSTED PRESENT VALUE 112
KEY DRIVERS 112
MODIFIED FCFE 113
KEY DRIVERS 113
COMPARISON WITH MARKET VALUE 113
COMPARABLES 118
BOEING CO. (BA) 119
UNITED TECHNOLOGIES CORP. (UTX) 119
LOCKHEED MARTIN CORP. (LMT) 120
RAYTHEON COMPANY (RTN) 120
NORTHROP GRUMMAN CORP. (NOC) 121
PRECISION CASTPARTS CORP. (PCP) 121
TRANSDIGM GROUP INC. (TDG) 122

7. ROCKWELL COLLINS INC. (COL) 122
TEXTRON INC. (TXT) 123
HARRIS CORP. (HRS) 123
MULTIPLES BREAKDOWN & ANALYSIS 123
MUTLIPLES USED 124
P/E MULITPLE 124
PRICE TO SALE 125
PRICE TO BOOK 125
PRICE TO CASH FLOW 126
PRICE TO FREE CASH FLOW 127
PRICE TO EBITDA 127
BETA 128
RELATIVE VALUATION 129
ANALYSIS AGAINST COMPARABLE COMPANIES 129
ANALYSIS AGAINST INUDSTRY, SECTOR AND THE S&P 500 130

9. GENERAL DYNAMICS
TICKER: GD INDUSTRY: AEROSPACE&DEFEN SE
GENERAL INFORMATION
GD provide products and services for the U.S. government,
Department of Homeland Security, Department of Defense, the
Health and Human Services agency and commercial airlines. The
company generates annual revenues of over 30 billion dollars
consistentlyfor over five years, Free Cash Flows of over three billion
dollars, and the company currently operates with over 90 billion
dollars in funded,backlogged orders.
Organizational Goals:
 Maintain a low debt structure of <10% debtfinancing
 Provide shareholder wealth through a residual dividend
structure and long term capital gains
 Procure new Governmentcontracts
 Diminish agencycostthrough shareholder approved
compensation plans
BUSINESS UNITS
 Combat Systems: 21.77% of Operating Earnings
 Marine Systems: 17.74% of Operating Earnings
 Information Technologies: 19.82% of Operating
Earnings
 Aerospace: 40.67% of Operating Earnings
General Dynamics’ is the leading provider for nuclear
submarines and destroyer warships for the U.S. Navy. GD operates
the only full-fledged shipyard on the west coast and designs and
constructs oil tankers and other surface carriers for Jones Act Ships.
General Dynamic’s aerospace division designs and builds business-
jets for private and public companies and operates a maintenance
and repair service with 25 service center locations worldwide. Since
2009 they invested over three billion dollars in acquisition and
divestitures. These acquisitions generated significant increases in
GD’s market share, mainly due to the technological advances of the
purchased companies and vertical integration of the overall supply
chain.
COMPENSATION PLANS
The compensation philosophy of General Dynamics is to align
executive compensation with company,business group andindividual
performance, to provide the incentives necessaryto attract, motivate
and retain high profile talent that help drive the company’s success.
The compensation committee approved a number of program
changes in recentyears, including:
 Implemented a three-year return on Invested capital metric,
instead of a one-year metric, for performance restricted
stock units
 Lengthened the term and vesting period of stock options to
further align options with long-term company stock
performance
FINANCIAL DATA
ANALYST OPINION
General Dynamics’ is coined as a must buy by several
analysts,and continues to show its abilityto provide improved returns
to shareholders. Its large backloggedorders for the U.S.government,
as well as many international commercial businesses,provide it with
a strong positionin the defense systems market. With many five year
projections showing positive and fast growth, General Dynamics’s is
in a greatposition to capture more ofthe marketshare from its larger
competitors. The information following depicts a brief company
history, products and services they offer, corporate governance and
control, and future financial analytics.

11. UNIT 1
GENERAL DYNAMICS
Incorporated in Delaware in
1952, General Dynamics is an aerospace
and defense company that offers a wide
range of products and business services,
ranging from corporate aviation, military
combat vehicles and weapon systems,
shipbuilding, and information
technology. Up until the 1990s General
Dynamics grew periodically through
acquisitions and product development, it
then decided to sell most of its business
divisions except its Electric Boat and
Land Systems. During the mid-1990s
they began to undertake new business
ventures including the acquisition of
combat vehicle-related businesses, new
and improved shipyards, information
technology companies, and eventually
the acquisition of Gulfstream Aerospace
Corporation in 1995.
Since their purchase of
Gulfstream the General Dynamics
Company acquired and integrated more
than 65 businesses to gain market
strength and diversify their business
portfolio. General Dynamics employs
over 90,000 people worldwide and
operates with four major business
divisions; Aerospace, Combat Systems,
Marine Systems, and Information
Technology. These four divisions are
discussed in further detail throughout
the analysis.
The main revenue generator for
General Dynamics is their Information
Systems and Technology division. For
years ending 2010-2013 this division’s
revenue accounted for 34 percent of the
company’s business. This division
provides both the Government and
commercial entities with the crucial
technologies necessary to share secure
and private information. They divide
this Information Technology sector into
three sub-sectors; secure mobile
communication systems, information
technology solutions with mission
support services, and surveillance
reconnaissance systems.
Their Secure Mobile
Communication System provides a high
tech secured communication system,
along with its operational hardware, to
customerssuch as the U.S. Departmentof
Defense, several federal and civilian
public safety groups, and a wide range of
international businesses. The goal ofthis
division is to provide their customers
with a secure and safe way to
communicate vital information, using
fast and private bandwidth
networks. Two major sections and
programs are the U.S. Army’s Warfighter
Information Network-Tactical (WIN-T),
and the Handheld Maniac Small Form Fit
(HMS) radios. General Dynamics is the
prime contractor for both of these
systems, providing the design,
engineering, integration, production,
support, and program management for
the entire network. The U.S. Army
already purchased over 25,000 of the
radios from the HMS program and plans
to purchase more than 240,000 in the
future as the technology advances. As
well as being the lead contractor for
these systems for the Government,

12. General Dynamics also provided the FAA
with over 13,000 radios for civilian air
traffic control use. The popularity of this
system General Dynamics provides
helped them win a new contract with the
FAA for future disbursement of updated
radios that are using the latest
communication technology. To further
diversify this department, General
Dynamics also provides tactical
communication systems to the Canadian
Department of National Defense, the U.K.
Ministry of Defense, and several other
public agencies across Europe and the
Middle East. Most notably they designed
and integrated one of the most advanced
control systems for the port in United
Arab Emirates, making it one of the most
advanced ports in the world.
Their second division is the
Information Technology solutions and
mission support services. This division
provides IT support and operational
systems to several large organizations
including the Department of Homeland
Security, Health and Human Services
agency, and other commercial domestic
and international customers. Their
product base is focused on large-scale
data centers, secure wireless and wired
networks, and operational training
systems. General Dynamics is the full
supporter of our Department of
Homeland Securities headquarters,
which includes one of the most advanced
IT infrastructures in the world. Along
with providing the Homeland Security
with safe and fast infrastructure for its
data, General Dynamics is also the
leading company offering modern
technology and management for the
Government Health Care system. They
focus on fraud prevention and detection,
analytics, and program management.
The third and final division is the
Intelligence, surveillance and
reconnaissance system. General
Dynamic’s main focus is on developing
and integrating operational support
systems for the U.S. defense sectors,
intelligence agencies, and homeland
security. A largeserviceprovided is its in
depth and state of the art cyber security
systems. These systems are in place to
help both government and commercial
customers protect their secret and
private data by using real time network
support. Over the last 40 years General
Dynamics provided the U.S. Navy with
submarine systems that support
integrated tactical controls for many of
their submarine classes. All three
divisions of the Information Systems and
Technology sector are providing the
ongoing needs of both domestic and
international governments. With the
increasing demand for such services,
General Dynamics is solidifying their
position in the market and are
diversifying their business portfolio
enough to maintain that position for the
foreseeable future.

13. Figure: 1-1 Description of the Information Systems and Technology’s Business Unit main products
The second largest division of
General Dynamics is the Combat Systems
group. This division is a world leader in
the development and production of
tracked and wheeled vehicles for several
military groups, and weapon systems
munitions for the U.S. and its allies. This
sector of General Dynamics provides
around 27 percent of revenue for the
company. The Combat Systems division
is a strongsectorbecauseofits long-term
production contracts with the U.S.
military, which provides long-term
revenue for General Dynamics and
maintains their cash flows for future
investments. The two main production
models for this division are the Stryker
combat vehicle and the Abram battle
tank. General Dynamics is committed to
the service and enhancements of these
vehicles, which enables them to be the
leader in maintenance and repair for
each model. This business model allows
them to maintain cash flow from the
government because they are the only
company that can provide complete
services for these two vehicle platforms.
Figure: 1-2 Description of the Combat Systems Business Unit main products

14. The third largest division is the
Aerospace sector. This sector provides
about 22 percent of revenues for the
company. As mentioned before their
aerospace division was started in 1995
when they purchased and integrated the
Gulfstream business aircraft. Unlike the
other divisions in the company the
Aerospace division is mainly focused on
providing the corporate business culture
with products, not domestic and
international governments. General
Dynamic’s niche in the market comes
from their superior aircraft quality and
design. They offer better performance,
safety, and technologically advanced
planes than their
competitors. Something else that sets
this company apart is its diverse line of
aircraft, ranging from large cabin
business jets, to smaller price mid-sized
cabined planes. All of their aircraft are
engineered and put together in its U.S.
facility in Savanna Georgia.
With the increased demand for
such aircrafts, General Dynamic’s
aerospace division remains a strong
competitor in the world market. The
North American demand remains
constant but the most important demand
is driven by international demand,
specifically the Asia-Pacific region. This
region comprises about 60 percent of the
companies’ backlogged orders. Due to
this increased international demand,
General Dynamics built service centers
around the world, in places such as China
and Brazil. These service centers
provide customers with urgent
deployable technicians, which is another
distinguishing factor driving the
companies increased demand for their
aircraft. The Aerospace division is
dedicated to its customer base and is
considered a market leader in the
business jet industry. The demand for
their business jet aircrafts provides
investors with a promising outlook for
future performance.
Figure: 1-3 Description of the Aerospace Business Unit main products
The fourthand final division is the
Marine division. It makes up about 21
percent of total revenues. This division
designs, and builds submarines and
surface warships for the U.S. Navy. They
focus on nuclear powered submarines,
surface warfare ships, commercial ships,
and the engineering support that goes
into each model. The primary work for
the U.S. Navy includes the constructionof
new vessels and the ongoing

15. development and maintenance of the
current naval fleet. A distinguishing
factor that keeps General Dynamics in
the lead for this market is their ability to
providethese ongoingservicesto the U.S.
Navy. Not only do they build the ships,
they provide all the maintenance and
repair, which keeps the governments
costs down and keeps General Dynamics
awarded contracts solidified for the
future.
Figure: 1-4 Description of the Marine Systems Business Unit main products
COMPANY HISTORY
General Dynamics was awarded
over 1.7 Billion dollars in contracts in the
year 2015 alone. The majority of these
contracts comefromthe U.S. government.
These ongoing contracts are what give
this company its edge in the market.
General Dynamic’s long standing history
with being awarded large government
contracts solidifies investors’ confidence
in the company fortheforeseeablefuture.
It is a major determining factor that
drives the stock’s value. In February the
company was awarded a 415 million
dollar contract which allowed them an
ongoing management service to the U.S.
Army. This announcement caused an
increase in stock price the next day by 10
percent and increased the trading
volume by 300,000 shares. In March the
board of directors decided to increase
the dividend payment from .62 cents
to .69 cents, which resulted in another
increase in the stock price. When that
dividend was declaredGeneralDynamics’
stock price went to a 16 month high of
over 150.00 dollars per share, in
comparison to its average of around
140.00 dollars per share.
A major recent event for General
Dynamics’s was the announcement and
contract award for the U.S. Navy’s new
Virginia Class Submarine valued at over
18 billion dollars. This announcement
alone raised the stock price after a

16. severalmonth low in early2014. General
Dynamic’s share volume also increased
by nearly 3 million in a single days
trading period. During this period their
earnings per share increased from 6.72
to 7.83, along with an increase in their
price earnings ratio.
In July of 2015 General Dynamics
raised its profit forecast due to their
second quarter revenue boost from their
aerospace and information technology
sectors. The marginal increase in
quarterly revenue, which was roughly 16
percent, also provided the company with
the ability to repurchase 7.5 million
shares from the open market. Another
reason for this profit forecast is the
company’s strong order backlogs. These
backlogs amount to around 70 billion
dollars. The backlogs are considered
funded backlogs which means they are
able to give investors’ confidence of the
cash flows they produce. The aerospace
division alone accounted for a 7 percent
increase in the quarter from the year
previous. The current estimated
contract value of both the aerospace and
information technology divisions are
around 25 billion dollars. If you add that
number to the already funded 70 billion
dollar backlog, the total potential
increase in value to the company is
around 95 billion dollars.
On the other spectrum, recent
news announcements hurt the
company’s stock price. Most recently on
September 14, 2015 their stock price
dropped by .13% due to investor
speculation that the U.S. Navy is going to
cancel an order that is already in
production. According to sources the
ship that General Dynamics is producing
is already over 40 percent complete and
a halt in production results in
devastating consequences to the
operations and cash flow for the
company. This ship is part of a 22 billion
dollar program awarded to General
Dynamics to build the Navy’s new
Zumwalt-Class destroyer. Thereasonfor
the stock price decrease is that the
Department of Defense announced a
consideration to cancel the order due a
new fiscal budget forecast for 2017.
General Dynamics’ also is a major
player when it comes to Acquisitions and
Divestitures. In 2013 and 2014 the
company did not do any such
transactions, but from 2009 up until
2013 General Dynamics’ invested over 3
billion dollars in cash to acquire multiple
companies. These acquisitions give the
company a leading edge in the market.
General Dynamics’ is meticulous in the
valuation of which companies they
acquire. Each and every company
acquiredin the years2009to 2012added
significant value to the company’s
operations. In 2009 the acquisition of
Axsys Technologies, Inc. was completed.
General Dynamics’ acquired this
company to capitalize on Axsys position
as being a global leader in the
manufacturing and design of high tech
infrared, and optical sensors that go into
cameras. Another major acquisition to

17. boost their health care portfolio was the
2011 purchase of Vangent Holding Corp.
Vangent was the leading provider of
healthcare information technology,
which was used by several business
systems and the federal government.
To close out the fiscal 2011 year
General Dynamics’ acquired the
company Force Protection, Inc., one of
the armed forces suppliers of wheeled
vehicles, survivability solutions, and
certain sustainment services. General
Dynamics’ is a major producer for the U.S.
Army or wheeled vehicles and tanks, so
the acquisition of Force Protection gave
the company more of a leading edge in
their market sector.
Figure: 1-5 Recent company acquisitions and divestures by year
PRODUCTS AND COMPETITION
MAJOR PRODUCTS

18. COMBAT SYSTEMS
The Combat Systems group
provides systems engineering, spanning
design, development, manufacture and
support military vehicles, weapons
systems, munitions and military vehicles
for the United States and NATO allies.
The group produces and delivers battle
tanks and tracked combat vehicles,
wheeled combat and tactical vehicles,
weapons systems and munitions and
provides sustainment, maintenance and
logistics support services. The
production of the portfolio of military
vehicles are produced at operation
facilities in North America and Europe.
The group is comprised of three
divisions: the European Land Systems,
Land Systems and Ordnance and Tactical
Systems.
European Land Systems division
operates in Austria, Germany, Spain and
Switzerland. The European Land
Systems constructs and provides tracked,
amphibious and wheeled vehicles, other
combat weaponsystems, armaments and
munitions to global customers.
Land Systems: Land systems offer
a spectrum of design, development,
production and lifecycle support. Land
System’s produce and support heavy,
medium and light wheeled vehicles and
heavy and medium tracked vehicles such
as the Abrams main battle tank and
Stryker, LAV and MRAP wheeled combat
vehicles. Land Systems utilize first-class
expertise to manufacture and provide
systems integration processesinorderto
develop vehicles designed to meet the
ground combat requirements of the
future.
General Dynamics Ordnance and
Tactical Systems manufactures large-,
medium- and small-caliber direct and
indirect-fire munitions, and leads the
development and production of weapons
and armament systems and lightweight
tactical vehicles. GD designs and
produces shaped charge and penetrator
warheads and manufactures precision
metal components for rockets, missiles
and composite structures for the
commercial, aerospace and defense
purposes.Thegroupproducesnon-lethal
and force-protection products as well as
propellants. Specifically the group
manufactures and supplies the US
government and its allies with medium-
caliber ammunition, large-caliber tank
ammunition, mortar and artillery
projectiles, Hydra-70 rockets, tactical
missile aero structures and high-
performance warheads, conventional
bombs and bomb cases.
Figure: 1-6 Revenues attributed by the Combat Systems unit

19. The Combat Systems Department
generated 18.6%, 19.6% and 25.4% of
GeneralDynamics Total Revenuesduring
2014, 2013 and 2012 and generated
$862,000,000, $904,000,000 and
$663,000,000 in operating profit during
those same years.
MARINE SYSTEMS
General Dynamics' Marine
Systems group designs, builds and
supports Jones Act ships for commercial
customers as well as submarines and
surface ships for the U.S. Navy:
The group provides overhauls,
repairs, lifecycle, design and engineering
support services, manufactures surface
combatants, auxiliary and combat-
logistics ships, nuclear submarines and
commercial containerships and product
carriers.
The Marine Systems group is
made up of three divisions: Bath Iron
Works, Electric Boat and NASSCO.
Bath Iron Works designs, builds
and supports a fleet of US Navy surface
vessels and missile destroyers. Bath Iron
Works developed a variety of ship
construction programs, such as the
Mobile Landing Platforms, which serve
as floating, mobile transfer stations to
support the US military’s amphibious
operations.
Electric Boat is the frontrunner in
submarine technology. Electric Boat
designs, builds and delivers lifecycle
support for the U.S. Navy's attack and
ballistic missile submarines. Electric
Boat is the lead contractor of the
Virginia-class submarine program and
was tasked with the development of the
ballistic-missile replacement for the
Ohio-class Submarine. NASSCO design
and build auxiliary and support ships for
the U.S. Navy, oil tankers and dry cargo
carriers for commercial purposes. It
owns only functioning full service
shipyard on the Pacific West Coast.
NASSCO also provides naval repair
services in San Diego, CA., Norfolk, Va.,
and Jacksonville, FL.
Figure: 1-7 Revenues attributed by the Marine Systems unit
The Marine Systems group
generated 23.7%, 21.5% and 20.9% of
General Dynamics Total Revenues for
2014, 2013 and 2012 and generated

20. $703,000,000, $666,000,000 and
$750,000,000 in operating profit during
those same years.
INFORMATION SYSTEMS AND TECHNOLOGY
The Information Systems and
Technology department produces
products, technologies and services that
address a wide range of military,
governmental and commercial
information-systems requirements. The
group enjoys great success in the market
because of the decades of experience,
expertise and continuous innovation to
provide feasible solutions to customers.
The department contains two divisions:
Information Technology and Mission
Systems. The IT division provides
customers with defense, homeland
security and intelligence IT solutions. It
builds, designs and constructs secure IT
systems and networks for US
government agencies
The It grouppartners with the U.S.
defense, intelligence, cyber and
homeland security agencies, and GD
Mission Systems division delivers
sophisticated technology, from open
architecture for submarines, aircrafts
and U.S. Navy surface ships to ground-
based tactical networking. The group’s
experience and expert support staff
deliver platform integration, ruggedized
displays and tactical networks.
The group is also a leading
provider in the U.S. healthcare IT market
and provides health care reform and
medical benefits programs service
support for government, civilian and
military health systems,. The group
offers data management, process
automation and program management,
fraud prevention and detection software
service solutions for commercial and
public health care systems.
The groupdesigns,builds, deploys
and supports mobile communication
systems and ISR solutions for the U.S.
Department of Defense, homeland
security agencies, and U.S. and NATO
allies. The group integrates and
manufactures secure communications
systems, command andcontrol solutions,
signals and information collection,
processing and distribution systems;
imagery sensors; and cyber security,
information assurance, and encryption
products, systems and services

21. Figure: 1-8 Revenues attributed by the Information Systems and Technology unit
The Information Technology and
Mission Systems group T generated
29.7%, 32.9% and 31.8% of General
Dynamics Total Revenues during 2014,
2013 and 2012 and generated
$785,000,000, $795,000,000 and
($1,369,000,000) in operating profit
during those same years.
AEROSPACE
The Aerospace department of GD
manufactures, produces and services
small-, mid- and large-cabin business-
jets to American and global Customers.
The Aerospace department is divided
into two divisions: GulfStreamAerospace
and Jet Aviation. Gulfstream produces,
provides and services private jets for
commercial and businessuse. In addition
to the design and production of new
aircraft models, the group works
diligently to enhancement the current
product line as well as develop new
technologies that improve systems and
technologies in advanced avionics,
renewable fuels, composites, flight-
control systems, vision systems and
cabin technologies.
The large-cabin business-jets are
produced in Savannah Georgia, while the
mid-cabin business jet production and
manufacturing is are contracted out to
Israel Aerospace Industries.
Jet Aviation is a full-fledged
aviation maintenance and repair service
company with more than 25 service
center locations worldwide. Jet Aviation
provides world-class maintenance,
repair, aircraft management and Fixed-
base Operator services to a global
customer base through their facilities
network that spans across four
continents.

22. Figure: 1-9 Revenues attributed by the Aerospace unit
The Aerospace group generated
28.0%, 26.0% and 21.9% of General
Dynamics Total Revenues during 2014,
2013 and 2012 and generated
$1,611,000,000, $1,416,000,000 and
$858,000,000 in operating profit during
those same years.
MAJOR COST COMPONENTS
General Dynamics’ groups’
expenses consist largely of costs of goods
sold and SG&A, however, the Aerospace
group experienced large fixed costs in
the last three years as Gulfstream’s
Savannah campus is currently
undergoing a $500 million seven-year
facilities amplification project to expand
the company’s R&D center, overhaul the
currentinfrastructureand constructnew
facilities. General Dynamics Statement of
Cash Flows shows that GD experienced
annual cash outflows for investments in
property, plant and equipment and
shows regular cash outflows for
inventories. Upon further analysis, the
common-size shows that costs of goods
sold or cost of revenue in 2014 was
80.96%, and SG&A accounted for 6.43%
of revenue. This shows that the company
largely incurs operating and
manufacturing expenses, and to a
smaller degree incurs SG&A and capital
expenditure.
CUSTOMERS
General Dynamics’ primary
customer is the US government's
Department of Defense, however, the
company also caters to US and non-US
commercial customers as well as non-US
defense customers. 60 percent of the
group's customer base are non-US
customers. 58 percent of General
Dynamics’ 2014 salerevenuescamefrom
the US government, 17 and 14 percent
from US and non-US commercial
customers and the remaining 11 percent
derive from non-US defense customers.
COMPETITORS
Within the US General Dynamic
facesits main competition fromthe other
leading Aerospace and Defense
companies: Boeing Co., United

23. Technologies Corp., Lockheed Martin
Corp. and the Airbus Group. GD also
competes with many small market firms
that provide and other specialized niche
market firms. Outside of the US, GD
competes with global defense
contractors as well as state-owned
defense companies. General Dynamics IT
department faces competition from a
large array of competitors both big and
small. General Dynamics competes with
the competitors in basis of price, quality
and timeliness, but GD is also often
required to partner with its competitors
in order to better fulfill a customer’s
needs. General Dynamics Aerospace
group must be competitive in areas of
comfort and in-flight productivity; new-
product and technological innovation;
aircraft reliability, safety and
performance as well as service quality.
MARKET SHARE DATA
Figure: 1-10 Market Share Data from Morningstar
According to data captured from
MorningStar, Boeing leads the Aerospace
and Defense industry with
$91,507,000,000 followed by United
Technologies Corp. with
$82,228,000,000, Lockheed Martin Corp.
with $64,221,000,000, Airbus Group SE
with $49,771,000,000 and then General
Dynamic with $45,788,000,000.
DOMINANT COMPANY IN THE INDUSTRY
Boeing is the dominant company
in the Industry with a market share of
$91,507,000,000. With facilities in over
140 countries Boeing is the dominant

24. company in the industry because of its
robust global presence, its strong, well-
positioned global distribution network
and because Boeing enjoys solid
relationships with many companies and
successfully set up joint ventures with
other well positioned Aerospace and
Defense companies such as Lockheed
Martin, who captures the second largest
market share of the Defense and
Aerospace Industry. Boeing built and
continues to service over 12,000
commercial jetliners, which is about 75%
of the world's commercial airliner fleet.
They are committed to deliver in-depth
support for out-of-production airplanes
and continue provide parts for these
jetliners. Lastly, Boeing became the
dominant company in this industry
because they worked close with
international suppliers to develop
unique concepts and technologies, which
created a very loyal following from
suppliers making them more likely to
enter into new contracts with Boeing
rather than its competitors.
CORPORATE CONTROL
MANAGEMENT TEAM
Phebe N. Novakovic
 Chairman and Chief Executive Officer of General
Dynamics Corporation since January 1, 2013.
 President and Chief Operating Officer at General
Dynamics Corporation from May 2, 2012 to
December 2012.
 Executive Vice President of General Dynamics
Marine Systems, Inc. from May 01, 2010 to May
2012
 Senior Vice President of Planning &
Development at General Dynamics Corporation
and General Dynamics Land Systems Inc. from
July 2005 to May 1, 2010.
 Vice President of Strategic Planning at General Dynamics Corporation from October
2002 to June 30, 2005.
 Staff Vice President of General Dynamics Corporation from May 2002 to October
2002.
 Director of Strategic Planning and Development March 2001 to May 2002.

25.  She serves as a Director of Abbott Diabetes Care, Inc. She was an Independent
Director at Abbott Laboratories since 2010.
 Total Calculated Compensation $19,388,084
John P. Casey
 Executive Vice President, Marine Systems, since
May 2012;
 Vice President of the company and President of
Electric Boat Corporation, October 2003 – May
2012.
 Vice President of Electric Boat Corporation,
October 1996 – October 2003
 Total Calculated Compensation $4,868,733
S. Daniel Johnson
 Executive Vice President, Information Systems
and Technology, and President of General
Dynamics Information Technology since January
2015.
 Vice President of the company and President of
General Dynamics Information Technology, April
2008 – December 2014.
 Executive Vice President of General Dynamics
Information Technology, July 2006 – March 2008
JasonW. Aiken
 Senior Vice President and Chief Financial Officer
since January 2014
 Vice President of the company and Chief
Financial Officer of Gulfstream Aerospace
Corporation, September 2011 – December 2013
 Vice President and Controller of the company,
April 2010 – August 2011
 Staff Vice President, Accounting of the company,
July 2006 – March 2011
 Total Calculated Compensation $5,112,642
Joseph T. Lombardo

26. ● Executive Vice President, Aerospace, since April 2007
● President of Gulfstream Aerospace Corporation, April 2007 – September 2011
● Vice President of the company and Chief Operating Officer of Gulfstream Aerospace
Corporation, May 2002– April 2007
SHARE ONWERSHIP AND COMPENSATION
EXECUTIVE COMPENSATION PLANS
General Dynamics’ executive
compensation is linked strongly to the
financial and operational performance of
the business. Over 90% of the CEO’s total
compensation is at risk in any given year if
the company performs poorly. Similarly
over 85% of the named executive officer’s
compensation is also at risk. A significant
amount of the compensation at risk is
delivered through equity, specifically
performance restricted stock units,
restricted stock and stock option. In order
to emphasize a culture of ownership and
to align management’s goals with long-
term shareholder interest, General
Dynamics requires one of the strictest set
of ownership guidelines in the aerospace
and defense industry. For example, the
CEO is required to whole 15 times base
salary in General Dynamics stock, other
executive officers must to hold 10 times
their base salary in GD stock. Executive
officer compensation is based on clear,
measureablegoalsrelatedto company and
business group performance. Ms.
Novakovic implemented, approved by
committee, a score card system for
evaluating whether the company’s
executive officers are meeting their goals.
Compensation committee sets, and the
Board approves, performance objectives
forthe coming yearthat aredesigned to be
challenging yet achievable. The program’s
effectiveness was best demonstrated in
2012, when due to lacking performance all
the restricted stock options were forfeited
by executives. However, the program is
not an all or nothing deal, many executives
received smaller target payouts over the
past two years for meeting some but not
all of the compensation committee goals.
To ensure market competitiveness,
General Dynamics links executive
compensation to the market. Each
component of the executive officers
compensation is targeted to the 50th
percentile of a core group of aerospace,
defense and industrial companies with
whom GD competes for business and
executive talent. The goalofthe committee
is to set compensation levels to be in
excess of the median compensation levels
of General Dynamics’s competitors. This is
not to say that compensation levels are
benchmarked at the median. If the
company and business groups exceed
their performance goals then
compensation exceeds the median,
likewise if performance goals aren’t met
compensation is reduced. Below is a chart
of the most recent year’s compensation
packages for executive officers with in
General Dynamics.

27. Figure: 1-11 Breakdown of executive compensation over the past three years
Along with implementation of the score
card system, General Dynamics’s
compensation committee implemented
other program changes in 2014 to
continuously improve the executive
compensation program and to further
align management goals with
shareholders.
Figure: 1-12 Recent program changes involving executive compensation
COMPARISON WITH COMPANIES WITHIN THE INDUSTRY
LOCKHEED MARTIN CORP. & BOEING INC.

28. Much like General Dynamics,
Lockheed Martin Corp. and Boeing Inc.,
GD’s biggest competitors, promote a
compensation plan that is market
competitive and performance based. Like
GD, both competitors look at the 50th
percentile of companies that the actively
compete with for market share and top
tier talent. After analyzing this percentile
bothcompetitors establish basesalary and
compensation levels for their named
executive officers. Additional
compensation is then based specifically on
performance and business unit metric
established by the compensation
committees and approved by each
company’s respective board members. GD
and its competitors all implemented Say
on Pay programs where shareholders are
allowed to vote on the proposed
compensation plans. These practices were
quite effective over the past years as
shareholder voting dramatically increased
since the first year of these programs
being enacted. Since the implementation
of these programs not one compensation
plan was vetoed by GD or its competitors.
While the compensation plans were not
vetoed, it is encouraging to see the
increase in shareholder involvement in
compensation plans across the industry.
Further shareholder voice, hopefully
increases the competiveness of
compensation plans with in the industry,
leading to more compensation being tied
to firm specific performance. Below you
can view charts of the total compensation
received by the executive officers of both
Lockheed Martin Corp. and Boeing Inc.
Lockheed Martin Corp.
Figure: 1-13 Lockheed Martin Corp. salaries and compensation for the year 2014

29. Figure: 1-14 Qualitative performance characteristics of Lockheed Martin Executives
Boeing Inc.
Figure: 1-15 Boeing Inc. salaries and compensation for the year 2014
BOARD MEMBERS
General Dynamics Board of Directors:

30. Figure: 1-16 List of General Dynamics Board of Directors with classification
In keeping with GeneralDynamics’sgoalof
strong corporate governance, the board of
directors is responsible for ensuring the
culture of ethics with in GD remains
untarnished. GD adopted ethics codes
specifically applicable to the board of
directors and financial professionals to
ensurethe companymeets its definedcore
values of: Honest, Trust, Humanity,
Alignment and Value Creation. To assist in
executing its duties the Board of Directors
established four standing committees:
Audit, Compensation, Finance and Benefit
plans, and Nominating and Corporate
Governance. Committees are composed of
the non-management and independent
board members. The guidelines for what
constitutes an independent board
members are stated below.
Independent Board Director Criteria:
Figure: 1-17 Criteria for independent board members

31. Board of Directors Compensation
Figure: 1-18 Compensation for the Board of Directors
*Ms. Novakovic’s compensation as a member of the Board is included in Figure 1-11
STOCK INSIDER ANALYSIS
Over the past 12 months the number of
insider purchases largely dwarfed the
number of insider sales, as reported to the
SEC. It is important to note that even
though there were more purchases
executed by insiders over the past 12
months, the volume of shares sold and
purchased by insiders is close to equal.
Over this time frame 585,811 were
purchased and 528,037 were sold by
insiders. This is most likely due to adverse
opinion of a few insiders who sold large
portions of their shares over the past 12
months. Overall, the actions of the insiders
indicates they are confident in the

32. company’s financial standing and believe
GD to be a strong investment for the years
to come.
Transaction Summary over past 12 months:
Figure: 1-19 Insider transaction summary
Transactions since May 2015:
Figure: 1-20 Insider transaction since May 2015
COMPARISON WITH COMPANIES WITHIN THE INDUSTRY
Lockheed Martin Corp.
Over the past 12 months Lockheed
insiders purchased less shares and sold
more shares of ownership. Sales by
Lockheed insiders over the past 12
months amounted to 41, while purchases
only totaled to 34. While sales by insiders
exceed purchases, the number of shares
purchased by insiders over the past 12
months exceeded the volume of shares
sold, 206,251 sold, 236,359 purchased.
These numbers indicate a split opinion by
Lockheed investors as to whether LMT is a
good investment for the future. In
comparison with GD, it appears that
Lockheed’s insiders are less certain about
the financial strength of LMT moving
forward.

33. LMT Transaction Summary over past 12 months:
Figure: 1-21 Lockheed Martin insider transaction summary over past 12 months
Boeing Inc.
Much like Lockheed Martin, Boeing
experienced greater sales of ownership by
insiders than purchases. Over the past 12
months, sales of ownership exceeded
purchases by 10. Unlike Lockheed Martin,
Boeing’s insiders sold a greater volume of
shares than they purchased, total volume
of sold shares equates to 740,535 while
total shares purchased remained at
685,571. This trend suggests that insiders
at Boeing are less confident in the
company’s financial future when
compared to similar investments.
BA Transaction Summary over past 12 months:
Figure: 1-22 Boeing Inc. insider transaction summary over past 12 months
THE FUTURE
ANALYST REPORT
ANALYST EARNINGS AND SALES ESTIMATES

34. Bloomberg Analysts predict that
General Dynamics are set to earn $31.85
billion dollars of revenue in 2015, 32.68
billion in 2016, 33.47 billion in 2017 and
34.40 billion in 2018, averaging about
2.73% growth over the 4 year period. This
is consistently similar to Yahoo Finance
analysts’ sales and sales growth estimates.
During that same time period Bloomberg
analysts forecast earnings per share to
equal $8.83 in 2015, $9.44 in 2016, $10.20
in 2017 and $10.94 in 2018, averaging
about a 7.23% growth in EPS over the 4
year period.
EARNING SURPRISES
In both 2013 and 2014 General
Dynamics experienced positive earnings
surprises in Earnings per share, sales and
net income. It beat its estimated EPS
(GAAP) in 2014 by 3.36% and .05% in
2013. GD also witnessed a positive
surprise earnings in Sales of .88%
and .36%. It also outperformed its
estimated net income in 2014 by 1.44%
and .28% in 2013. Exhibit ## shows that
GD met all of their earnings estimated for
EPS over the last 8 years except in 2011
and 2012.This is due to largeimpairments
in intangible assets that were deferred till
2011. This seriously affected their
earnings and is the major reason for the
negative earnings surprises in those years,
and even though net income was only
affected in 2012 it missed its earnings
estimate by 6.73%. GD did outperform its
sales estimates for 2014 and 2013 despite
the decrease in the US defense budget, but
missed its sales estimates from 2007 to
2012 by an average of -.98%.
Figure: 1-23 Data from Bloomberg illustrating recent surprises in the past years earnings
ANALYST RECOMMENDATIONS
General Dynamics’ stock
recommendations for 2015 are very
strong. The industries top analysts from
Credit Suisse, JP Morgan, Wells Fargo
Securities and UBS rate the stock with a
buy, outperform or overweight
recommendation, signaling that the stock
is performing very well compared to the
market. Similarly, exhibit ##
demonstrates that General Dynamics’
stock performed consistently with analyst

35. estimates over the past 5 years and it
validates said analysts’ recommendations.
Figure: 1-24 Analyst recommendations since 2010
EXPERT FORECAST
According to Bloomberg analysts,
General Dynamics is set to experience
3.55% growth in revenue on average over
the next five year period, generating
$31,866,400,000 in 2015 and
$36,615,000,000 by 2019. During that
same time, it’s expected to generate an
increase in gross profit of 3.98% percent
on average, however, the analysts only
forecast this account for 2015 and 2016.
This is possibly due to the forecasted
marginal decrease in the US government
defense spending budget. Net income is
expected to increase by 3.43% over the
next 5 years on average reaching
2,902,100,000 in 2015 and
$3,210,000,000 by 2019, which is
consistent with forecasted revenues for
those same years. This indicates that the
analysts’ are confident that General
Dynamics’ productivity is set to remain
relatively constant over the same time
period, thus General Dynamics is
maintaining cost structure and costs are
forecasted to grow persistent with sales
growth. Analysts forecast that dividends
are set to increase as well over the 5 year
period by an average of 7.71%. Exhibit ##
also shows that analysts are confident
General Dynamics EPS is set to experience
increases of growth of about 8.13% over
the next 5 years, generating $8.83 per
share to $12.07 per share by 2019.
Deloitte’s annual Aerospace and Defense
industry outlook forecasts that the
industry is projected to grow around 3%

36. Figure: 1-25 Experts forecast for key financial indicators
PERSONAL FORECAST (GROUPS FORECAST)
According to the groups analysis,
the growthrates werechosenbasedonthe
experts’ average growth rates over the
next five years because General Dynamics
performed quite well since its
management change due to positive
earnings surprises in both 2013 and 2014.
The expert analysis already takes into
account the forecasted decreases in
defense spending planned by the US
government over the next five years, thus
the growth rates are proportionate to
expected industry growth. It is also
expected that the commercial aerospace
sector is set to grow at 8%, which offsets
the slowed growth in the General
Dynamics defense revenues. Based on the
3.55% growth rate in revenues General
Dynamics is forecasted to earn
$31,946,180,000 in 2015 and
$36,724,980,000 by 2019. Net income and
dividends are both set to grow by 3.43 %
and 7.71% respectively. Net income is
forecasted to reach 2,619,760,000 in 2015
and $2,997,570,000 by 2019, while
dividends are expected to grow to $2.61 in
2015 and $3.51 by 2019. General
Dynamics’ is set to earn $8.17 dollars per
share in 2015 and this is expected to grow
at 8.13% and reach $11.18 dollars per
share by 2019.
Figure: 1-26 Expected forecast based upon Bloomberg historical data and recent trends

39. GENERAL DYNAMICS
STOCK PRICE PERFORMANCE
Over the past 10 years, General Dynamic’s stock
performance is correlated with its competitors. On average
General Dynamic’s stock return out performed its two large
competitors Lockheed Martin Corp., +2.06%, and Boeing Inc.,
+2.66%. It out-performed United Technologies Corp. and the
S&P500 by 2.96% and 5.51% respectively over the same period.
General Dynamics’ stock performed its best over the past two
years due to positive earnings surprises with returns of 44.03%
and 37.94% in 2014 and 2013 respectively. In 2014, GD
outperformed all competitors and the S&P 500 by and average
return of 34.73%.
Yearly Stock Returns: GD vs. Competitors & S&P500
ABSOLUTE PERFORMANCE
ARITHMETIC VS. GEOMETRIC MEAN OF RETURNS
General Dynamics S&P Industry Index
S&P 500
Over a ten year period General Dynamics on average
out-performed the S&P Industry Index, along with the S&P 500
market index.
Its Coefficient of Variation is lower than that of the S&P
500 which suggests a better risk return tradeoff, however, it is
more volatile than the Aerospace Defense Industry as a whole.
FINANCIAL PERFORMANCE
GROWTH PERFORMANCE
REVENUE
Due to government contracts on average revenues grew at a rate
of 5.08% over the last ten years. However, revenues decreased
marginally over the last three years due to decreases in the
defense budget.
DIVIDEND GROWTH
 General Dynamics shows positive Dividend growth,
despite the defense budget decrease.
FINANCIAL PERFORMANCE & DUPONT ANALYSIS
 A two year increase in Return on Equity is accompanied
by a decrease in Asset efficiency and an increase inDebt.
The budget cuts hurt its ability to use its assets
efficiently for sales.
Z-SCORE ANALYSIS
General Dynamics and the
Aerospace and Defense industry
is in no position to expect
financial distress.
2012 2013 2014
Dividend 2.04 2.24 2.48
Dividend Gr. 8.51% 9.80% 10.71%
2013 2014
ROE 19.39% 20.45%
Asset Turn. 0.9 0.87
Debt/Equity 0.27 0.33
Rev per emp. 310,070.00$ 325,188.00$
PM A/T EM
DuPont GD 8.21% 0.87 2.69
Industry 8.58% 0.53 1.7
ZScore
General Dynamics 2.85
Industry 2.49

41. UNIT 2
STOCK PRICE PERFORMANCE
PRICE PERFORMANCE
In comparison with General Dynamics’
largest competitors, the S&P
Aerospace/Defense Index, and the S&P
500’s ten year stock prices and yearly
returns are strongly correlated. After
graphing the yearly returns of General
Dynamics’, its competitors, the market,
and the industry index it is clear from
Exhibit ## that these returns move
together in the market. Looking
specifically at General Dynamics’ stock
performance, our analysis shows that GD’s
stock experienced, while inconsistent,
positive growth over the time period we
observed, 12/31/03-12/31/14. During
two years over the specified time period
GD’s stock suffered a negative return of -
6.41% and -35.26%, in 2011 and 2008
respectively. The large loss in 2008 can be
attributed to the Great Recession and the
drastic toll it took on the entire U.S.
economy.However,the loss in 2011is firm
specific, attributable to large impairments
of intangible assets and large amounts of
discontinued operations which hurt the
bottom line. Since 2011 GD’s stock
performed strong , earning a return of
44.03% and 37.94% in 2014 and 2013
respectively, and outperforming its
competitors, the S&P 500 and the S&P
Aerospace/Defense Industry Index by an
average of 34.74% ( Exhibit ##), in the
year 2014.
COMPETITORS
Lockheed Martin: As one of General
Dynamics’s largest competitor it is
important to compare the stock
performance of GD with Lockheed
Martin’s performance. Exhibit ## shows
that over the ten year period on average
LMT’s (Lockheed Martin) stock return is
14.94%, which outperformed GD’s return
of 12.90%. The geometric average of the
yearly returns, which is a better indicator
of the actual average return, was used to
show how LMT outperformed GD over the
same time period using a different, more
mathematically correct approach.
Boeing: In comparison with its
largest competitor Boeing (BA), GD stock
price underperformed over the ten+ year
time frame. Boeing’s average arithmetic
return over the time period was 15.56%,
where General Dynamics’ average was
only 12.90%. Diving deeper, its apparent
Boeing outperformed General Dynamics
by an average of +2.66% a year over our
analytical time frame. However, from
2012-2014, General Dynamics’ stock
return exceeded Boeing’s by an average of
+2.40% per year.

42. United Technologies: As is the case with
General Dynamics previous competitors
the stock return of United Technologies
(UTX) did consistently outperform GD’s
stock return over the ten year time frame.
However, due to GD’s recent dominating
stock performanceoverthe past two years,
the average over the past 10 years was
skewed and GD’s stock return
outperformed UTX’s by 2.96%. Looking at
the time period of 2004-2011 it’s revealed
that UTX’s stock return out performed
GD’s by +.21% per year. Looking at the
most recent three years GD’s stock return
outperformed UTX’s by an average of
11.42% per year.
AEROSPACE AND DEFENSE INDEX/MARKET
Moving forward, it’s important to
analyze GD’s stock returns with the
returns of the market, S&P 500, and the
S&P Aerospace/Defense Industry Index.
Lookingat Exhibit ## andseeit’s clear that
the returns of GD are strongly correlated
with the market and index returns. Diving
deeper we can discern that GD’s returns
were consistently outperformed by the
market and index from 2009-2012. Like
many in its industry, GD experienced a
sharpincreasein returnsduring2013. The
greatest return during this period of
81.12%, was achieved by Boeing Co.
However, it is important to note that after
2013 most competitors of GD and the
market/index experienced a sharp decline
in their returns. From the graph we see
that GD’s return did not sharply decline
like that of its competitors. During the
year 2014 GD’s returns increased from
37.94% in 2013 to 44.03%. While our
analysis shows that GD was outperformed
by the market and its competitors over the
analytical time frame, we also seethat over
the past three years GD’s stock returns
enjoyed an upward sloping trend, which
allowed it to surpass its competitors in
recent years.
Figure: 2-1 Difference in competitors,industry and market returns when compared to General Dynamics over the past 10
years

43. Figure: 2-2 Comparison of stock returns over the past 10 years
ABSOLUTE PERFORMANCE
Moving forward in the analysis it is
imperative to look into the absolute
performance of GD’s stock prices and
returns in comparison with its
competitors, market and industry index.
Begin by calculating and observing GD’s
and competitor’s geometric mean. The
geometric mean is a preferred measure
when comparing two companies’ stock
returns. This is due to the fact that the
geometric mean recognizes that the
individual returns of a company are not
independent from year-to-year. If returns
were completely independent of each
other from year-to-year the arithmetic
mean is an acceptable method for
computing the average,like calculating the
class average on a test. However, returns
are dependent upon each other, consider
for example if one loses a lot of money one
year, thenat the beginning ofthe following
year there is less capital to generate
returns. By calculating the geometric
mean one can better compare two
companies as apples-apples rather than
apples-oranges. Looking at the geometric
means of the last 10+ year’s returns it is
clear that GD underperformed in
comparison to Lockheed Martin and
Boeing. However, GD’s stock returns
performed better than that of United
Technologies, the S&P 500 and the
industry index when comparing the
geometric means. Moving on to the next
measure of absolute performance,
standard deviation, which is a metric that
calculates the relative volatility of the
yearly returns. Looking at the calculation
it is evident that GD yearly stock returns
over the past 10 + years were less volatile
than LMT and BA its two largest
competitors. This means GD experienced
more consistent returns over the
analytical period than did LMT and BA. On
the other hand, GD’s volatility is higher
than UTX’s, SPX 500’s and SPX Industry
Index’s. This indicates that GD

44. experienced a larger disbursement of
returns in comparison to United
Technologies, the market and the S&P
industry index.
Now it is goodto know the volatility
of returns in comparison to comparable
corporations, however that doesn’t quite
tell the whole story. Moving on to the
coefficient of variance helps fill in the rest
of the picture. The coefficient of variance
allows us to assess risk as a function of
returns. The metric indicates how much
volatility or risk an investor is assuming in
comparison to the amount of return you
can expect form your investments. The
lower the coefficient of variance is the less
risk an investor assumes for to obtain the
expected returns. Comparing GD’s
coefficient of variance to that of it’s
competitors and the market indicates that
investors of GD assume less risk to obtain
their returns than investors who bought
into UTX, BA and the S&P 500. However,
GD’s coefficient of variance is greater than
that of LMT and the S&P industry index,
indicating that investors of GD assumed
more risk for their returns than did the
investors of LMT and the S&P industry
index. The final measure of absolute
performance that is good to observe is
simply asking, if an individual invests
$10,000 dollars at the beginning of the
analytical period what is the value of their
investment today? Observing Exhibit ##,
one can see that when an individual
invested $10,000 at the end of 2004, their
investment grew to a value of over
$30,000 by the end of the year 2014. One
can also see from Exhibit ##, that an
investment in GD at the end of 2004 is
worth more today than an equal monetary
investment at the same time in the S&P
500 and the Aerospace & Defense index. It
is understandable after going through the
previous analysis that an investment of
similar value in Lockheed Martin at the
end of 2004 yields a greater value today
than the same investment in GD.
Figure: 2-3 Graph depicting the key stock performance indicators of General Dynamics, competitors, the market and
industry

45. Figure: 2-4 Graph illustrating a comparison of growth in a $10,000 investment over the past 10 years
PERFORMANCE CONCLUSION
After completing the stock performance
analysis it is the opinion of these analyst
that General Dynamics is an inferior
investment to Lockheed Martin, a superior
investment to United Technologies,
Boeing and the S&P 500 and a similar
investment to the S&P Aerospace/Defense
Industry Index. The conclusion that GD is
an inferior investment to LMT is derived
from the fact that LMT experienced a
higher average arithmetic mean, a higher
geometric mean, a marginally higher
standard deviation and a lower coefficient
of variance when compared to GD’s
returns over the same time period. LMT’s
greater geometric mean and lower
coefficient of variance indicates that
investors assume less risk for returns that
are on average higher than GD’s returns.
The same logic is applied when looking at
United Technologies, Boeing and the S&P
500. When observing the geometric mean
and coefficient of variance of these
investments it is clear to see from Exhibit
## that investing in UTX, BA and SPX 500
assumes more risk than investing in GD
but provides less returns, or returns that
are marginal greater in the case of BA.
Moving forward, it is easy to see from
Exhibit ## that GD is incredibly similar to
the S&P Aerospace/Defense index. The
absolute performance of GD and the index
over the analytical period are incredibly
identical, making them good similar
investments.
It is the opinion of these analyst
that General Dynamics’s strong stock
return performance over the last three
years continues on into the future. One
reason for this belief is that U.S. govt.
defensespending is estimated to remain at
current levels of over $800 billion dollars
per year all the way through 2020. With
General Dynamics’ strong performance

46. overthe past threeyearsthe company is in
line for more than its fair share of
governmentcontracts in the coming years.
Seeing as U.S. government contracts make
up more than 60% of GD’s revenue it is
reasonable to speculate that this large
portion of revenue won’t be adversely
affected in the future. Another reason for
the analyst optimism towards General
Dynamics are the recent defense contracts
that the company won this past year. On
Sept. 30th, 2015 GD was awarded a $358
million dollar contract for Abrams Tanks
only 13 days after it was awarded a $322
million dollar contract from the Navy for a
nuclearsubmarineproject. Analyst believe
these contract trends are projected to
remain consistent over the coming years
indicating GD can experience healthy
growth and returns over that same time
period. The final reason for analyst
optimism lies within the new corporate
management, in particularly with the new
Chairman and Chief Executive Officer
Phebe Novakovic. Since Mrs. Novakovic’s
appointment to CEO on January 1st, 2013
the company experienced the best returns
and stock performance over the past 10+
years. With Mrs. Novakovic’s continued
leadership and direction General
Dynamics looks to be a great investment
for the immediate future.
FINANCIAL PERFORMANCE
GROWTH PERFORMANCE
General Dynamics’ consistently
shows positive growth in the Aerospace
and Defense industry. According to
Deloitte’s industry outlook, the Aerospace
and Defense sector is currently projected
to grow by 3 percent for the rest of 2015.
Accompanying this growth are also higher
profit margins even with increases in fuel
costs asa function of sales. This infers that
the industry as a whole becomes more
efficient in asset utilization and are
experiencing the economic principle of
economies of scale. There is sufficient
analytical evidence and research to
conclude that General Dynamics’ is also
projected to follow this industry growth
rate. Historical analysis shows that
General Dynamics’ not only increased
their dividend payment to investors, it also
increased its Return on Equity despite the
decrease in recent year’s revenues. The
analysis shows these historical growths
and breaks down the individual ratios and
drivers that influence the growth of the
company.
REVENUE
For the last ten years General
Dynamics’ revenues show an average
growth of 5.08%. From 2005 up until the
financial recession its growth was
significantly higher than their average, it
reached 14.70% in 2006 and tailed off to
13.50% in 2007 before the distress hit the
market. In 2008 General Dynamics’
witnessed a severe drop in sales due to the
contraction of government spending; their
sales growth fell 50 percent down to 7.00.
Their competitors also experienced such

47. financial distress due to the economic
recession. Lockheed Martin (LMT), a
similar government defense contractor’s
sales experienced a mere growth of 2.57
percent. Despite the recession General
Dynamics’ and its competitors maintained
a relatively positive sales growth.
Revenues for it and Lockheed Martin were
growing consistently until 2011 year end
when bothcompanies witnessed their first
decreasein salessince the beginning ofthe
millennium
Figure: 2-5 Comparison of sales growth between General Dynamics and its competitors over the past 10 years
GROSS MARGIN
For ten years General Dynamics
also maintained a consistent gross profit
margin, despite the economic downturn in
2008. From 2005 until 2014 it maintained
an average gross margin of 17.68%, which
was nearly double that of its competitor
Lockheed Martin. It is only inferior to
United Technologies which maintained an
average of 27.24% for the ten year period.
It was directly comparable to Boeing Co.
whose gross margin was 17.31% during
the same period. The industry as a whole
continued to show strong abilities to
control their costs and keeping their profit
margins steady, even as the government
slowed down its spending on the Defense
sector.
Figure: 2-6 Comparison of General Dynamics and competitors gross margin over the past 10 years
GeneralDynamicsandcomparablesGrossMargins
Years 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Company GrossMargin Average
GD 16.59% 17.14% 17.30% 18.27% 17.60% 18.20% 17.92% 16.19% 18.52% 19.04% 17.68%
LMT 8.02% 9.98% 10.81% 12.01% 9.53% 8.78% 8.26% 8.99% 10.10% 11.79% 9.83%
UTX 27.60% 27.37% 27.10% 26.98% 26.57% 27.45% 27.59% 26.95% 27.63% 27.12% 27.24%
BA 16.11% 18.03% 19.56% 17.33% 17.20% 19.38% 18.72% 15.95% 15.42% 15.44% 17.31%

48. EBITDA
General Dynamics’ was superior to
its competitors and the industry with the
highest average maintained EBITDA
growth for the ten year historical period.
It and its competitors were hit with
negative EBITDA growth years once the
financial recession hit in 2008. The first
company to experience distress was
Boeing, with a -25.30% decline in EBITDA
growth in that year. Lockheed Martin and
United Technologies showed positive
growth until 2009 and 2010, and just like
Boeing their growth went negative.
General Dynamics’ maintained a positive
growth up until 2011 when they
experienced a small decline in their
EBITDA growth. In 2012 it showed
massive losses on their reported financial
statements to the IRS, and consequently
experienced a -67.11% decline in the
EBITDA growth from the previous year.
Each company, including General
Dynamics’ came out of the recession and
combated the decline in EBITDA growth
and ended the ten year period with
averages ranging from General Dynamics
one of 19.88%, to United Technologies
8.99%
Figure: 2-7 Comparison of EBITDA growth between General Dynamics and its competitors over the past 10 years
DIVIDEND GROWTH
A key performance indicator for
investors is the dividend growth of a
company. General Dynamics’ during the
ten year period increased its dividend
payment to its investors. From 2005 until
2014 its dividend grew on average at
13.28%, from paying out .80 cents per
shareto $2.48 pershare. It showeda slight
decline in growth during the economic
recession but still maintained a positive
increase in the payment itself. Lockheed
Martin show superior performance in its
ability to return value to investors with
dividends increasing from $1.05 per share
in 2005 to $5.49 persharein 2014. Boeing
Co. beganthe historical period with paying
out $1.05 per share and increased its
dividend per share to $2.92, making it a
good analytical comparison to General
Dynamics’ in the industry. Across the
board each company in the Aerospace and
Defense industry increased its dividend
payments during the ten year period. This
gives investor’s confidence that even
General DynamicsandcomparablesEBITDAperformance
Years 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Company EBITDAgrowth Average
GD 10.59% 20.07% 17.51% 15.95% 3.34% 6.54% -2.13% -67.11% 190.02% 4.06% 19.88%
LMT 40.66% 27.80% 13.33% 11.78% -11.83% -3.19% -2.22% 8.70% 1.35% 19.85% 10.62%
UTX 13.67% 16.80% 15.65% 15.31% 8.79% -13.67% 6.64% 1.09% 19.79% 5.86% 8.99%
BA 8.55% 41.13% 35.88% -25.30% -30.81% 78.04% 12.03% 7.96% 3.76% 11.58% 14.28%

49. though government spending declined the
companies, including General Dynamics’,
are willing to maintain dividend policy
which shows confidence with internal
management.
Figure: 2-8 Graph illustrating dividends paid per share and dividend growth over the past 10 years
Figure: 2-9 Dividends paid per share and dividend growth over the past 10 years
SUSTAINABLE GROWTH
Due to constant inflows of
government contracts General Dynamics’
sustainable growth rate was 15.5% on
average over the ten year period. It was
only superior to United Technologies
which was only able to maintain a growth
rate of 14%. General Dynamics’ in inferior
to its two larger competitors Lockheed
Martin and Boeing, their sustainable
growth rates for the period were 66.5%
and 34.10% respectively. The overall
AerospaceandDefenseindustry generates
billions of dollars in backlogged orders
funded from the U.S. Government so there
is no reasonnotto expect a constant ability
for all companies to maintain a high
sustainable growth rate.
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Dividend Growth
Dividend Paid Dividend Growth
GeneralDynamics 12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014Average
DividendPaid 0.80 0.92 1.16 1.40 1.52 1.68 1.88 2.04 2.24 2.48
DividendGrowth 11.00% 15.00% 26.09% 20.69% 8.57% 10.53% 11.90% 8.51% 9.80% 10.71% 13.28%
Dividends

50. Figure: 2-9 Comparison of General Dynamics and its competitors Dividend POR, ROE, Growth Rate and Plowback Rate
FINANCIAL PERFORMANCE
FINANCIAL CONDITION RATIOS
General Dynamics’ is superior with
its liquidity ratios to those of its
competitors. For the historical period it
averaged a current ratio of 1.29. The
industry’s competitor’s lower current
ratios indicate that General Dynamics’ is
more capable of paying its liability
obligations than they are. Another
financial condition ratio analyzed was the
Debt to Equity ratios of each company.
The highest levered company in the
analysis was Lockheed Martin, which
averaged a Debt/Equity ratio of 17.68.
This suggeststhat it is using debt financing
to fund growth, which represents more
risk for investors but if the cost of debt is
lower than that of equity it can provide
higherreturnsforthe company asa whole.
General Dynamics’ maintained a
debt/equity ratio of .311 on average. It is
relying less on long term bank debt to
finance its operations which lowers the
risk for investors but decreases the
possibility of more earnings to disperse to
its shareholders. General Dynamics’ is
operating at a lower debt/equity ratio
than its other competitors Boeing and
United Technologies Corp.
General Dynamics 12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 Average
Dividend POR 22.24% 21.75% 22.55% 22.24% 24.43% 24.39% 26.84% 0.00% 31.60% 30.75% 22.7%
ROE 19.06% 20.65% 19.19% 22.54% 21.42% 20.42% 20.04% 17.80% 19.39% 20.45% 20.1%
Growth Rate 14.82% 16.16% 14.86% 17.53% 16.19% 15.44% 14.66% 17.80% 13.27% 14.16% 15.5%
Plowback Rate 77.76% 78.25% 77.45% 77.76% 75.57% 75.61% 73.16% 100.00% 68.40% 69.25% 77.3%
Lockheed Martin 12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014
Dividend POR 25.32% 21.27% 20.17% 22.91% 30.28% 36.78% 40.93% 48.94% 52.00% 48.12% 34.7%
ROE 24.52% 34.29% 36.35% 50.78% 82.09% 74.41% 119.24% 525.47% 129.69% 88.45% 116.5%
Growth Rate 18.31% 26.99% 29.02% 39.15% 57.24% 47.04% 70.43% 268.31% 62.26% 45.89% 66.5%
Plowback Rate 74.68% 78.73% 79.83% 77.09% 69.72% 63.22% 59.07% 51.06% 48.00% 51.88% 65.3%
United Technologies Corp12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014
Dividend POR 27.59% 26.66% 26.81% 26.91% 36.88% 35.29% 34.52% 37.55% 34.78% 34.08% 32.1%
ROE 19.64% 21.77% 21.86% 25.27% 23.62% 21.85% 22.32% 20.37% 19.73% 18.51% 21.5%
Growth Rate 14.22% 15.96% 16.00% 18.47% 14.91% 14.14% 14.61% 12.72% 12.87% 12.20% 14.6%
Plowback Rate 72.41% 73.34% 73.19% 73.09% 63.12% 64.71% 65.48% 62.45% 65.22% 65.92% 67.9%
Boeing Company 12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014
Dividend POR 33.61% 44.92% 27.06% 44.72% 92.36% 37.60% 31.49% 34.84% 35.80% 40.58% 42.3%
ROE 23.02% 28.04% 59.29% 0.00% 0.00% 122.14% 114.58% 84.82% 46.64% 46.29% 52.5%
Growth Rate 15.28% 15.44% 43.24% 0.00% 0.00% 76.21% 78.50% 55.27% 29.94% 27.50% 34.1%
Plowback Rate 66.39% 55.08% 72.94% 55.28% 7.64% 62.40% 68.51% 65.16% 64.20% 59.42% 57.7%

51. Figure: 2-10 Comparison of financial condition ratios of General Dynamics and its competitors over the past 10 years
PROFITABILITY RATIOS
Discussed earlier in our analysis
was General Dynamics’ gross margin and
EBITDA ratios. This section focuses on
another profitability ratio known as the
Revenue per employee ratio. General
Dynamics’ recorded the second highest
profit per employee ratio between its
competitors. Boeing Co. generated the
most revenue per employee with an
amount of $431,482.80, while General
Dynamics earned $326,332.70. A lot of
factors go into this ratio so it is important
to mention that each company varies
greatly when it comes to its employee
structure. The analyst team does not
consider this ratio to be an important
variable when calculating the value of the
company.
Figure: 2-11 Comparison of average revenue per employee of General Dynamics and its competitors
General Dynamics and comparables financial performance ratios
Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Average
Quick Ratio 1.08 1.01 1.1 0.91 1 1.01 1.1 1.07 1.19 0.95 1.042
Current Ratio 1.33 1.26 1.34 1.15 1.28 1.27 1.28 1.25 1.47 1.27 1.29
LT D/E 0.34 0.28 0.18 0.31 0.25 0.18 0.3 0.34 0.27 0.29 0.274
Tot. D/E 0.4 0.28 0.24 0.4 0.31 0.24 0.3 0.34 0.27 0.33 0.311
Quick Ratio 0.77 0.72 0.8 0.71 0.79 0.76 0.8 0.7 0.76 0.66 0.747
Current Ratio 1.12 1.06 1.11 1.01 1.17 1.15 1.16 1.14 1.2 1.11 1.123
LT D/E 0.61 0.64 0.44 1.24 1.22 1.35 6.45 157.9 1.25 1.81 17.291
Tot. D/E 0.63 0.64 0.45 1.33 1.22 1.35 6.45 161.74 1.25 1.81 17.687
Quick Ratio 0.62 0.67 0.67 0.69 0.72 0.73 0.83 0.67 0.7 0.72 0.702
Current Ratio 1.12 1.24 1.26 1.24 1.29 1.33 1.38 1.24 1.29 1.3 1.269
LT D/E 0.35 0.41 0.38 0.59 0.41 0.47 0.43 0.83 0.62 0.57 0.506
Tot. D/E 0.48 0.46 0.43 0.72 0.49 0.48 0.47 0.9 0.64 0.63 0.57
Quick Ratio 0.41 0.41 0.49 0.3 0.53 0.46 0.42 0.43 0.43 0.37 0.425
Current Ratio 0.78 0.77 0.86 0.84 1.07 1.15 1.21 1.27 1.26 1.2 1.041
LT D/E 0.86 1.72 0.83 0 5.74 4.15 2.85 1.53 0.54 0.94 1.916
Tot. D/E 0.97 2.01 0.91 0 6.07 4.49 3.52 1.77 0.65 1.05 2.144
General Dynamics
Lockheed Martin
United Technologies Corp
Boeing Co
General Dynamics and comparables Revenue per Employee
Company Average revenue per employee
GD 326,332.70$
LMT 339,102.50$
UTX 259,498.70$
BA 431,482.80$

52. MANAGEMENT EFFECTIVENESS RATIOS
Management’s ability to build value
for its shareholders is a major driver of
company value. General Dynamics’ Net
Return on Assets for the ten year period
was 7.11% on average, and its Net Return
on Equity was 17.69%. It also shows a
high percentagereturnfor its investments.
Using the Operating Return on Investment
ratio the analyst team concluded that
General Dynamics’ averaged a return of
21.10% for the ten year period.
Figure: 2-12 General Dynamics management effectiveness ratios over the past 10 years w/ historical average
ASSEST MANAGEMENT RATIOS
A key performance measure of a
companies’ ability to utilize its assets
efficiently is the Total Asset Turnoverratio.
This ratio examines the relationship
between total revenue or sales, and total
assets. General Dynamics’ average asset
turnover ratio of 1.025 for the ten year
period. It is inferior to the majority of its
competitors in the industry. Lockheed
Martin outperformed each competitor
with an average of 1.323. Another
performance measure is the Inventory
Turnover ratio. This ratio examines the
relationship between sales and inventory.
This ratio is difficult to analyze for each
competitor. This is because a high ratio
either means an increase in sales or an
ineffective use of inventory. A low ratio
implies a decrease in sales, therefor an
excess in inventory. General Dynamics’
average over ten years was 12.444, while
its competitorLockheedMartins is 18.152.
United Technologies Corp and Boeing are
both lower with averages of 5.163 and
3.737 respectively. These averages
suggest that General Dynamics’ is less
efficient with its inventories than Boeing
and United Technologies, but it is more
efficient than Lockheed Martin. Boeings’
average is the lowest but it is not because
ofa decreasein sales. Earlierin this report
it is noted that Boeings increase in sales
growth was consistent from2009. The low
ratio implies that it’s using its inventories
inefficiently, or there is an excess in
relation to its sales. Each company shows
an increase in the Accounts Payable
Turnover ratio, which examines the
relationship between total supplier
purchases and average accounts payable.
GeneralDynamicsManagementEffectivnessRatios
GD Year 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005Average
ROA%(Net) 7.16% 6.76% -0.96% 7.49% 8.25% 8.05% 9.06% 8.61% 8.85% 7.87% 7.11%
ROE%(Net) 19.24% 18.21% -2.69% 19.03% 20.39% 21.30% 22.48% 19.19% 20.65% 19.06% 17.69%
ROI%(Operating) 22.78% 21.86% 5.12% 22.72% 24.05% 24.21% 25.44% 22.92% 21.83% 20.04% 21.10%

53. This ratio demonstrates the companies’
ability to pay its suppliers on time. All
companies in the industry, including
General Dynamics’, increased this ratio by
paying off its suppliers faster. A decrease
in the ratio signals a companies’ inability
to produce enough cash flow to pay its
short term obligations on time, and as a
whole the AerospaceandDefenseindustry
increased the ratio, signaling strong
growth for the future.
Figure: 2-13 Comparison of asset management ratios between General Dynamics and its competitors
DUPONT ANALYSIS
GENERAL DYNAMICS
General Dynamics’ average DuPont
calculated Return on Equity for the ten
year period is 17.54%. It is inferior on
paper to the other companies but it is
important to note that the other
companies experienced financial distress
duringthe economic downtownand began
to borrow a lot of money to fund growth.
This high levered approach increases the
Equity Multiplier (EM) portion of the
DuPontequation. You cansee that in years
2011 through 2012 Lockheed Martin
increased its EM drastically to support
company growth. It grew from 9.21 in
General Dynamics and comparables Asset Management
Years 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Average
Company/Ratios
General Dynamics
Total Asset Turnover 1.14 1.15 1.13 1.08 1.08 1.02 0.97 0.91 0.9 0.87 1.025
Receivables Turnover 4.49 4.21 4.02 3.89 4.01 3.85 3.56 3.35 3.4 3.46 3.824
Inventory Turnover 15.12 15.32 15.54 14.05 12.68 12.4 12.01 10.39 8.86 8.07 12.444
Accounts Payable Turnover 13.2 13.13 12.75 12.27 13.3 12.73 11.61 11.72 13.24 14.33 12.828
Accrued Expenses Turnover 17.93 16.27 15.87 17.51 19.91 20.76 20.05 18.35 18.7 20.2 18.555
Property Plant & Equip Turnover 9.89 11.21 11.74 10.94 11.06 11.04 10.45 9.4 9.16 9.15 10.404
Cash & Equivalents Turnover 12.85 12.23 12.12 12.95 16.47 13.32 12.42 10.57 7.26 6.37 11.656
Lockheed Martin
Total Asset Turnover 1.4 1.42 1.46 1.37 1.32 1.31 1.27 1.23 1.21 1.24 1.323
Receivables Turnover 8.58 8.64 8.79 8.34 7.96 7.75 7.87 7.45 7.32 7.78 8.048
Inventory Turnover 18.32 20.23 22.3 21.04 20.06 18.4 17.61 15.87 13.92 13.77 18.152
Accounts Payable Turnover 19.99 18.78 19.1 20.33 22.26 25.05 23.87 21.85 26.41 30.74 22.838
Accrued Expenses Turnover 26.38 25.9 26.77 26.4 27.12 26.04 26.32 28.41 26.23 25.09 26.466
Property Plant & Equip Turnover 9.89 9.93 10 9.68 10.03 10.1 10.15 10.13 9.67 9.64 9.922
Cash & Equivalents Turnover 22.53 19.07 18.36 17.7 19.82 19.69 15.92 17.17 20.09 22.45 19.28
United Technologies Corp
Total Asset Turnover 0.99 1.03 1.08 1.05 0.94 0.95 0.97 0.76 0.7 0.72 0.919
Receivables Turnover 6.3 6.41 6.63 6.52 6.02 6.25 6.3 5.58 5.55 5.72 6.128
Inventory Turnover 5.8 5.64 5.41 5.18 4.9 5.16 5.42 4.86 4.56 4.7 5.163
Accounts Payable Turnover 11.69 11.83 11.75 11.38 10.73 11.04 10.8 9.59 9.35 9.35 10.751
Accrued Expenses Turnover 4.93 4.96 5.13 5.01 4.44 4.52 4.74 4.17 4.09 4.44 4.643
Property Plant & Equip Turnover 7.87 8.43 9.11 9.26 8.33 8.59 9.32 7.82 7.21 7.18 8.312
Cash & Equivalents Turnover 18.94 19.96 20.1 16.19 12.06 12.73 11.59 10.68 13.27 13.21 14.873
Boeing Co
Total Asset Turnover 0.96 1.1 1.2 1.08 1.18 0.98 0.93 0.96 0.95 0.95 1.029
Receivables Turnover 10.08 10.92 11.33 10.04 11.21 10.84 11.48 13.31 13.47 12.26 11.494
Inventory Turnover 7.58 6.29 6.05 4 3.47 2.51 1.98 1.96 1.82 1.71 3.737
Accounts Payable Turnover 7.05 7.84 6.99 6.26 8.01 8.68 8.53 9.15 9.17 9 8.068
Accrued Expenses Turnover 8 8.35 11.01 10.66 7.48 4.72 4.67 5.01 4.57 4.29 6.876
Property Plant & Equip Turnover 6.5 7.65 8.33 7.13 7.78 7.26 7.54 8.59 8.71 8.55 7.804
Cash & Equivalents Turnover 12.73 10.67 10.09 11.78 10.94 8.82 8.92 7.99 8.92 8.72 9.958

54. 2010 to 73.62 in 2012. This statistical
outlier caused its average ROE to be
115.48 percent for the ten year period.
Another company that’s outlier skewed
the results was Boeing Co. In 2009 it
increased its leverage to where its EM hit
138.89, which increased that years ROE to
314.00%. These outliers skew the overall
DuPont analysis for the industry, but with
the adjusted ROE growth factors in the
sustainable growth section this is
accounted for.
Figure: 2-14 Historical DuPont Analysis for General Dynamics
COMPETITORS
Figure: 2-15 Lockheed Martin’s DuPont Analysis over the past 10 years
Year Profit Margin Asset Turnover Equity Multiplier Unadjusted ROE
2005 6.97% 1.13 2.43 19.14%
2006 7.10% 1.14 2.34 18.94%
2007 7.61% 1.13 2.23 19.18%
2008 8.39% 1.08 2.48 22.47%
2009 7.49% 1.08 2.65 21.44%
2010 8.08% 1.02 2.47 20.36%
2011 7.73% 0.97 2.54 19.05%
2012 -1.05% 0.91 2.81 -2.68%
2013 7.62% 0.89 2.7 18.31%
2014 8.21% 0.87 2.69 19.21%
Average 6.82% 1.022 2.534 17.54%
General Dynamics DuPont Analysis
Year Profit Margin Asset Turnover Equity Multiplier Unadjusted ROE
2005 4.09% 1.4 3.58 20.50%
2006 6.38% 1.42 3.79 34.34%
2007 7.25% 1.46 3.42 36.20%
2008 7.53% 1.37 4.92 50.76%
2009 6.87% 1.28 9.8 86.18%
2010 6.30% 1.3 9.21 75.43%
2011 5.71% 1.27 16.23 117.70%
2012 5.82% 1.23 73.62 527.02%
2013 6.57% 1.21 15.1 120.04%
2014 7.93% 1.24 8.81 86.63%
Average 6.45% 1.318 14.848 115.48%
Lockheed Martin DuPont Analysis

55. Figure: 2-16 United Technologies Corp DuPont Analysis for the past 10 years
Figure: 2-17 Boeing Co DuPont Analysis for the past 10 years
INDUSTRY
The Aerospace and Defense
industry as a whole shows an adjusted
average ROE of 26.87 percent. The
outliers in the individual DuPont
calculations is accounted for and the
numbers are adjusted to portray the true
ROE of the industry over the ten year
period.
Year Profit Margin Asset Turnover Equity Multiplier Unadjusted ROE
2005 4.80% 0.92 5.2 22.96%
2006 3.60% 1.1 7.08 28.04%
2007 0.06% 1.2 8.06 0.59%
2008 4.39% 1.08 14.63 69.36%
2009 1.92% 1.18 138.89 314.67%
2010 5.14% 0.98 26.69 134.44%
2011 5.85% 0.93 23.65 128.67%
2012 4.77% 0.97 18 83.28%
2013 5.29% 0.95 8.75 43.97%
2014 6.00% 0.95 8.15 46.46%
Average 4.18% 1.026 25.91 87.24%
Boeing Co DuPont Analysis
Year Profit Margin Asset Turnover Equity Multiplier Undjusted ROE
2005 7.18% 0.99 2.76 19.62%
2006 7.80% 1.03 2.71 21.77%
2007 7.71% 1.08 2.63 21.90%
2008 7.85% 1.07 3 25.20%
2009 7.24% 0.94 3.14 21.37%
2010 8.05% 0.95 2.76 21.11%
2011 8.93% 0.93 2.77 23.00%
2012 8.89% 0.77 3.16 21.63%
2013 9.14% 0.7 3.12 19.96%
2014 9.55% 0.72 2.88 19.80%
Average 8.23% 0.918 2.893 21.54%
United Technologies Corp DuPont Analysis

56. Figure: 2-19 Industry DuPont Analysis
ALTMAN’S Z-SCORE ANALYSIS
GENERAL DYNAMICS
The Altman Z-Score analyzes the
potential for a publically traded company
to experience financial distress in the near
future. The score gives an investor an idea
ofhow stable the company is financially. A
z score of over 2.85 shows that a company
is in no financial distress, while one below
1.80 means that the company is going to
face bankruptcy within the next year. The
middle of the two extremes is considered
the grey area and an investor needs to be
careful and analyze the company in
question to make sure they are confident
in the companies’ chances of growth.
General Dynamics’ Z score is 3.3648, so
according to the Altman analysis it is no
danger of financial distress. Its
competitors Lockheed Martin, United
Technologies Corp, and Boeing all show Z
scores of 3.4141, 2.9248, and 2.4179
respectively. The only companies that are
in the grey range are United Technologies
and Boeing. If you consider the financial
position the companies are in according to
the financial statements, neither United
Technologies nor Boeing are set to
experience financial distress within the
next two years.
Company Profit Margin Asset Turnover Equity Multiplier
GENERAL DYNAMICS CORP 8.21 0.87 2.69
LOCKHEED MARTIN CORP 7.93 1.24 8.81
RAYTHEON COMPANY 9.83 0.85 2.62
BOEING CO/THE 6.00 0.95 8.15
TEXTRON INC 4.32 1.01 3.18
MOOG INC-CLASS A 5.97 0.82 2.24
HEXCEL CORP 11.29 0.96 1.68
NORTHROP GRUMMAN CORP 8.63 0.91 2.97
TELEDYNE TECHNOLOGIES INC 9.09 0.85 1.94
MSA SAFETY INC 7.79 0.91 2.29
PRECISION CASTPARTS CORP 15.29 0.53 1.7
Average Average 8.58 0.90 3.48
Du pont Analysis ROE26.87% 26.87%
Industry Du Pont Analysis

57. Figure: 2-20 General Dynamics most recent Z-score evaluation
COMPETITORS
Figure: 2-21 Competitors most recent Z-score evaluation
Factors Ratio Value Weight Z-Score
NWC/Total Assets 0.1034 1.2 0.12408
RE/Total Assets 0.5976 1.4 0.83664
EBIT/Total Assets 0.1108 3.3 0.36564
MV of Equity/BV of Total Liab. 1.9431 0.6 1.16586
Sales/Total Assets 0.8726 1 0.8726
Z-Score 3.36482
General Dynamics Z Score
Factors Ratio Value Weight Z-Score
NWC/Total Assets 0.0328 1.2 0.03936
RE/Total Assets 0.4034 1.4 0.56476
EBIT/Total Assets 0.1523 3.3 0.50259
MV of Equity/BV of Total Liab. 1.7957 0.6 1.07742
Sales/Total Assets 1.23 1 1.23
Z-Score 3.41413
Lockheed Martin Z Score
Factors Ratio Value Weight Z-Score
NWC/Total Assets 0.0752 1.2 0.09024
RE/Total Assets 0.4887 1.4 0.68418
EBIT/Total Assets 0.111 3.3 0.3663
MV of Equity/BV of Total Liab. 1.7851 0.6 1.07106
Sales/Total Assets 0.7131 1 0.7131
Z-Score 2.92488
United Technologies Corp Z Score
Factors Ratio Value Weight Z-Score
NWC/Total Assets 0.1116 1.2 0.13392
RE/Total Assets 0.3647 1.4 0.51058
EBIT/Total Assets 0.0754 3.3 0.24882
MV of Equity/BV of Total Liab. 1.0161 0.6 0.60966
Sales/Total Assets 0.915 1 0.915
Z-Score 2.41798
Boeing Co. Z Score

58. INDUSTRY
The Aerospace and Defense
industry as a whole gives no inclination
that it might experience any financial
distress in the near future. The industry
average Z score for the period is 3.0304.
The fact that each company backlogs
billions of dollars in funded orders from
the U.S. Government and other affiliates,
gives this analyst team a strong sense of
future industry growth. All these signs
give investors a positive outlook.
Figure: 2-22 Industry average Z-score evaluation
Factors Ratio Value Weight Z-Score
NWC/Total Assets 0.08075 1.2 0.0969
RE/Total Assets 0.4636 1.4 0.64904
EBIT/Total Assets 0.112375 3.3 0.3708375
MV of Equity/BV of Total Liab. 1.635 0.6 0.981
Sales/Total Assets 0.932675 1 0.932675
Z-Score 3.0304525
Industry Average Z Score

60. GENERAL DYNAMICS
COST OF CAPITAL, CAPITAL STRUCTURE ANALYSIS
AND DISTRIBUTIONS
DEBT
General Dynamics’ ten year average cost of debt is
3.24%. It maintains an average market value Debt/Equity ratio
of 31.16%. Its use of long term debt to finance operations is
minimal compared to its competitors. Lockheed Martin, Boeing,
and United Technologies use a significantly higher amount of
long term debt. Lockheed Martins’ 2014 Debt/Equity ratio is
181.00%; therefore the analytical approach to determine a target
Debt/Equity ratio of 30% was calculated ignoring major
statistical outliers from comparable companies’, it is determined
from General Dynamics’ historical ratio analysis.
EXTERNAL EQUITY
General Dynamics’ market capitalization is $46,198.40
billion dollars. Its shares outstanding decreased from 2007 to
2014, from 402.37 million to 331.39 million respectively. Its
levered costof Equity is 9.47% with a beta of 1.02. Unlevered its
cost of external equity is 3.39%, with a beta of .19. Comparable
companies Lockheed Martin, Boeing, and United Technologies
Corp maintain costs of equity close to General Dynamics’, being
8.68%, 9.56%, and 9.73% respectively.
INTERNAL EQUITY
General Dynamics’ cost of internal equity is 8.30%. Its
calculation is derived from a projected 6% dividend growth, and
a researched flotation cost of 7%. A 6% dividend growth rate is
based off General Dynamics’ historical residual dividend
payment.
COST OF CAPITAL
CAPITAL STRUCTURE
FORECAST
Cost of Debt 2.20%
Book Value Debt/Equity 7.00%
Mkt. Value Debt/Equity 33.06%
Target 30.00%
General Dynamics Debt Structure
Company Cost of Equity Average
GD 9.47% 9.36%
LMT 8.68%
BA 9.56%
UTX 9.73%
General Dynamics and Comparables External Equity
Estimated Dividend Growth 6.00%
Flotation Costs 7.00%
Internal Cost 8.30%
General Dynamics Internal Cost of Equity

61. DISTRIBUTIONS TO SHAREHOLDERS
Even though it is apparent that General Dynamics’ yearly
dividends are based on a residual model, and grew at a 10.01%
rate on average since the Great Recession, thus an appropriate
and conservative yearly dividend growth rate going forward is
6%.

62. UNIT 3
COST OF CAPTIAL, CAPITAL STRUCTURE ANALYSIS AND DISTRIBUTION
DEBT
RELEVANT COST OF DEBT
General Dynamics’ relevant cost of
debt over the ten year period is 3.24% on
average. From 2005 up to 2008 it
maintained a consistent mixture of short
term and long term debt. The short term
debt utilized is an average of 16%,
consequently the long term debt utilized is
84%. In 2008 General Dynamics’ began to
use more short term and long term debt to
finance operations due to the recession in
the contracting economy. The nextyear its
cost of debt increased to 4.14%, up from
1.64% in 2008. Research into this matter
concludes that the cost of debt drastically
dropped during 2008 due to a sharp
decline in Federal Reserve borrowing
interest rate averages. Interest rates
decreased to a point that it enabled
General Dynamics to borrow a large
amount of short term debt and increase its
long term debt to equity structure. In
2009 when the market began to make its
way back towards equilibrium, General
Dynamics’ was paying a higher interest
rate on debt than when they borrowed in
2008. Its interest expense increased and
caused the increase in the relevant cost of
debt. In comparison to its industry
competitors General Dynamics’ cost of
debt is higher. Lockheed Martin, Boeing,
and United Technologies Corp. borrow at
1.77%, 1.85%, and 1.76% respectively.
This is due to the fact that General
Dynamics’s uses far less short and long
term debt than its competitors, which
directly affects the cost of debt because
companies that borrow more on average
pay a lower cost to borrow.
Relevant cost of debt (in millions)
Short Term Debt Long Term Debt Interest Payments Net Cost of Debt
2005 509.00$ 2005 2,778.00$ 118.00$ 3.59%
2006 7.00$ 2006 2,774.00$ 101.00$ 3.63%
2007 673.00$ 2007 2,118.00$ 70.00$ 2.51%
2008 911.00$ 2008 3,113.00$ 66.00$ 1.64%
2009 705.00$ 2009 3,159.00$ 160.00$ 4.14%
2010 773.00$ 2010 2,429.00$ 157.00$ 4.90%
2011 23.00$ 2011 3,907.00$ 141.00$ 3.59%
2012 -$ 2012 3,908.00$ 156.00$ 3.99%
2013 1.00$ 2013 3,908.00$ 86.00$ 2.20%
2014 501.00$ 2014 3,410.00$ 86.00$ 2.20%
Average 3.24%
General Dynamics Debt

63. Figure: 3-1 General Dynamics cost of debt over the past 10 years
Figure: 3-2 Comparison of competitors Total Debt/Equity ratios with cost of debt
DEBT RATIOS
GeneralDynamics’ debt structure is
different than its competitors. As
mentioned before it uses less debt to
finance operations,andit’s morereliant on
equity to fund growth. Since 2005 it
averaged a Total Debt/Equity ratio of
31.16%, which is far less than Lockheed
Martin and Boeing whose Total
Debt/Equity ratios averaged 173.83% and
208.91% respectively. The high ratios are
due to the decision to use large amounts of
long term debt to fund operations. In
comparison General Dynamics’ is more
efficient in its operations because it
provides value for its investors and it does
so by not requiring the use of such high
volumes of debt. It is far more comparable
but still superior with its Long Term
Debt/Assets ratio. This ratio indicates a
companies’ ability to meet its financial
obligations. A higher percentage means
that the company needs to maintain
greater revenue and cash flow to support
the expenses due the assets being more
encumbered. General Dynamics’ averaged
a 10.66% ratio, and its competitors
Lockheed, Boeing, and United
Technologies were comparable at 15.37%,
13.34%, and 17.19% respectively. This
presents the argument that General
Dynamics’ needs to produce less revenue
to support its liability payments compared
to its competitors in the industry.
Year Lockheed Martin Boeing United Tech. Corp
2005 63.38 97 46.37
2006 64.48 201.27 43.74
2007 44.95 91.26 41.08
2008 132.81 0 68.8
2009 122.35 580.85 45.56
2010 143.52 434 45.43
2011 645.35 342.88 44.27
2012 16174.36 174.44 85.04
2013 125.09 64.25 60.73
2014 181.44 103.19 60.52
Cost 1.77% 1.85% 1.76%
Comparables Total Debt/Equity and Cost of Debt

64. General Dynamics (GD)
Figure: 3-3 Debt ratios for General Dynamics
 General Dynamics maintains a
relatively constant debt to equity
structure, unlike its competitors
who use far more long term debt
financing
 The small difference in Long Term
Debt/Equity and Total Debt/Equity
is due to the small changes in the
use of short term debt
 The Long Term Debt/Assets ratio
suggeststhat GDis more efficient at
producing revenues to support its
liabilities
Year Long term/Equity Year Long term/Assets
2005 34.11 2005 14.1
2006 28.23 2006 12.4
2007 18 2007 8.23
2008 30.97 2008 10.97
2009 25.43 2009 10.17
2010 18.25 2010 7.47
2011 29.53 2011 11.2
2012 34.31 2012 11.39
2013 26.95 2013 11.01
2014 28.83 2014 9.65
Average 27.461 10.659
Year Total Debt/Equity Year Total Debt/Capital
2005 40.36 2005 28.75
2006 28.3 2006 22.06
2007 23.72 2007 19.17
2008 40.03 2008 28.59
2009 31.1 2009 23.72
2010 24.05 2010 19.39
2011 29.7 2011 22.9
2012 34.31 2012 25.55
2013 26.96 2013 21.23
2014 33.06 2014 24.85
Average 31.159 23.621
General Dynamics Debt Ratios

65. Comparable Companies Relevant Debt Ratios:
Lockheed Martin (LMT)
Figure: 3-4 Debt Ratios of Lockheed Martin
 Lockheed Total Debt/Equity and
Long Term Debt/Equity ratios are
larger than GD’s.
 It focuses more on the use of debt
to finance its company growth.
 The Long Term/Asset ratio is also
higher than GD’s, suggesting that is
less efficient in producing revenues
to support its liabilities.
 A noticeably significant ratio is the
one in 2012 when Lockheed
increased their borrowing by over
a 1,000%.
Year Long term/Equity Year Long term/Assets
2005 60.81 2005 17.24
2006 63.99 2006 15.6
2007 43.89 2007 14.88
2008 124.36 2008 10.66
2009 122.35 2009 14.39
2010 143.52 2010 14.29
2011 645.35 2011 17.04
2012 15789.74 2012 15.93
2013 125.09 2013 17
2014 181.44 2014 16.64
Average 1730.054 15.367
Year Total Debt/Equity Year Total Debt/Capital
2005 63.38 2005 38.79
2006 64.48 2006 39.2
2007 44.95 2007 31.01
2008 132.81 2008 57.05
2009 122.35 2009 55.03
2010 143.52 2010 58.94
2011 645.35 2011 86.58
2012 16174.36 2012 99.39
2013 125.09 2013 55.57
2014 181.44 2014 64.47
Average 1769.773 58.603
Lockheed Martin Debt Structure (Book Value)

66. Boeing Co. (BA)
Figure: 3-5 Debt Ratios of Boeing Co
 Boeing’s Total Debt/Equity and
Long Term Debt/Equity ratios are
larger than General Dynamics’, but
they are smaller than that of
Lockheed Martins.
 Long Term Debt/Asset ratio is
smaller than Lockheed Martin’s,
but 3 points higher on average than
General Dynamics’.
 A noticeably significant ratio is the
one in 2009 when it is obvious that
Boeing increased their use of debt
financing to repair any issues from
the recession.
Year Long term/Equity Year Long term/Assets
2005 86.25 2005 15.9
2006 172.12 2006 15.75
2007 82.8 2007 12.64
2008 0 2008 12.93
2009 549.08 2009 19.69
2010 400.87 2010 16.73
2011 277.66 2011 12.52
2012 150.38 2012 10.09
2013 53.82 2013 8.71
2014 92.62 2014 8.21
Average 186.56 13.317
Year Total Debt/Equity Year Total Debt/Capital
2005 97 2005 49.24
2006 201.27 2006 66.81
2007 91.26 2007 13.93
2008 0 2008 13.97
2009 580.85 2009 85.31
2010 434 2010 81.27
2011 342.88 2011 77.42
2012 174.44 2012 63.56
2013 64.25 2013 39.12
2014 103.19 2014 50.78
Average 208.914 54.141
Boeing Co. Debt Structure (Book Value)

67. United Technologies Corp
Figure: 3-6 United Technologies Corp Debt Ratios
 United Technologies Corp is the
most comparable to General
Dynamics’ debt structure
 Their Long Term Debt/Equity and
Total Debt/Equity ratios are
consistent with how General
Dynamics’ are. That being the
small increase is due to changes in
Short Term borrowing
 Unlike BoeingandLockheedMartin,
United Technologies Corp. did not
increase long term borrowing
significantly after the recession.
Year Long term/Equity Year Long term/Assets
2005 33.4 2005 12.92
2006 38.81 2006 14.93
2007 35.99 2007 14.69
2008 55.16 2008 16.43
2009 38.61 2009 14.81
2010 44.2 2010 17.11
2011 40.99 2011 15.46
2012 79.09 2012 24.16
2013 59.23 2013 21.79
2014 54.65 2014 19.58
Average 48.013 17.188
Year Total Debt/Equity Year Total Debt/Capital
2005 46.37 2005 31.68
2006 43.74 2006 30.43
2007 41.08 2007 29.12
2008 68.8 2008 40.41
2009 45.56 2009 31.3
2010 45.43 2010 31.24
2011 44.27 2011 30.68
2012 85.04 2012 45.96
2013 60.73 2013 37.78
2014 60.52 2014 37.7
Average 54.154 34.63
United Technologies Corp Debt Structure (Book Value)

68. EXT ERN AL EQ UIT Y
RELEVANT COST OF EXTERNAL EQUITY
General Dynamics’ external cost of
equity is derived from using the Capital
Asset Pricing Model. This model factors in
the current Risk Free Rate, usually based
on Long-Term Treasury Bills, the Market
Risk Premium, and General Dynamics’
Beta.
CAPM:
Cost of Equity = 𝑹𝒇 + ( 𝑹𝒎 − 𝑹𝒇) ∗ 𝜷
 General Dynamics’ Cost of Equity is 9.43%
INPUTS:
Risk Free Treasury Rate- 2.21%
Expected Return on the Market- 9.22%
Risk Premium- 7.22%
Beta- 1.03
Figure: 3-7 General Dynamics Cost of Equity using CAPM
General Dynamics’ cost of equity is
currently higher than it was for the fiscal
year ending 2014. This is due to the
company becoming more risky in relation
to the market. Its Beta increased from .98
to 1.03 and the risk free rate increased
slightly. In 2013it wasmorerisky than the
market, its Beta of 1.26 is due to the fact in
2102it showedgreat losseson its financial
statements. This adds the perception of
higher risk to investors and the market.
Year 2015 2014 2013
Risk Free 2.21% 2.17% 3.03%
Market Return 9.22% 9.24% 9.77%
Risk Premium 7.22% 7.07% 6.75%
Beta 1.03 0.98 1.26
Cost of Equity 9.43% 9.10% 11.53%
General Dynamics Cost of Equity
Captial Asses Pricing Model

69. COMPARABLE COMPANIES CAPM:
-Lockheed Martin (LMT)
INPUTS: Risk Free – unchanged
Expected Market Return-unchanged
Risk Premium- unchanged
Beta - .84
Figure: 3-8 Lockheed Martin cost of equity using CAPM
-Boeing Co. (BA)
INPUTS: Risk Free – unchanged
Expected Market Return-unchanged
Risk Premium- unchanged
Beta-1.197
Figure: 3-9 Boeing Co. cost of equity using CAPM
Year 2015 2014 2013
Risk Free 2.21% 2.17% 3.03%
Market Return 9.22% 9.24% 9.77%
Risk Premium 7.22% 7.07% 6.75%
Beta 0.84 0.953 1.037
Cost of Equity 8.66% 8.91% 10.02%
Lockheed Martin Cost of Equity
Captial Asses Pricing Model
Year 2015 2014 2013
Risk Free 2.21% 2.17% 3.03%
Market Return 9.22% 9.24% 9.77%
Risk Premium 7.22% 7.07% 6.75%
Beta 1.197 0.946 0.914
Cost of Equity 9.60% 8.86% 9.19%
Boeing Co. Cost of Equity
Captial Asses Pricing Model