EFTA01371091

31 October 2017 Railroads Canadian Rails I Figure 1 I: Our DCF framework for CP translates to an implied PIE multiple of 7.5>. CP DCF Framework 2016 2012E 2018E 2019E 2020E 2021E 2022E 2023E 2014E 2025E Terminal atn. Gross Revenue 7.556 7,858 8.172 8,499 8.839 9.193 9.537 YoY Change (%) 5.0% 4.4% 64% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 3.75% EMT 2,747 2,860 3 'lab 3.400 3,536 3,678 3,825 3,978 4.137 4,292 % margin 42.4% 42.0% 43.3% 44.4% 45.0% 45.0% 45.0% 450% 45.0% 45.0% 45.0% IrnpIkO Off OSIMerest 22 23 24 25 26 27 29 30 31 32 33 EBET • Interest adjustment 2,600 2,770 2,984 3,251 3.426 3,564 3,706 3$54 4,006 4,169 4,325 % margin 41.7% 42.3% 43.7% 44.8% 453% 45.3% 45.3% 45.3% 45.3% 45.3% 45.3% Cash tat rate Oil j -• ; . . -, Cl. 166% 183% 19.9% 21.6% 23.2% 24.9% 26,5% Unlevered Free Cash now 1,995 2,355 2,536 2,764 2,856 2,912 2,967 3,023 3,078 3,133 3,179 NOPAT % of revenue 32.0% 36.0% 37.1% 38.0% 37.8% 37.1% 36.3% 35.6% 34.8% 344% 33.3% D&A 640 680 683 719 758 789 822 856 891 928 963 % of reeenue MI% 10.1% 10.0% 10.0% 10.0% 10.0% 10.1% 101% 10.1% 10.1% 101% Net Caper (1.005) Et ":‘25} (1.417) (1.478) 11441) (1.607) (1,675) (1.7471 aim % of revenue 417.1%) OS 9%) (18.7%) (18.7%1 (18.8%) (18.8%) (18.9%) 08.9%) (19.0%) (19.0%) (19.0%) Working capital • 0 0 0 0 0 0 0 Unlevered FCE 1,514.0 1,790.1 1,934.1 2,1652 2,1963 2,223.0 2,2483 2272.1 2,2942 2,314.4 2,330.1 Time factor . • . 1.0 Discount factor 100.0% 9274 8589: 79.5% 237% 683% 63.3% 58 .6% 58.6% PV of cash flews 2,006.1 1.8855 1.268.2 1.656.9 1,551.4 1,451.4 L356.6 31.673.6 tdalirstillthstIss sA her As m• Don NPV 44.356 Revenue growth 2020-2025 4.0% Net Debt (3Q'17) Ternunal revenue growth 3.75% PV of Operating leases 2C3 Terminal MIT Margin 450% 4-Reached by 2020 Implied Equity Value 36,077 Terminal The Rate 26.5% 41:1'18e Sharecount Terminal O&A (% of rev.) 10.1% USD/CAD 5t.25 Terminal Capra OS of rev.) (19.0%) ImplbO Share Price $209 Translates to- 17,5x our 2029 EPS estimate Tg.ttttttgct.tttttt — tra;ttttttrattt, Historical RFR 2.35% Equity Risk Premium (EPP) 7.00% Beta itl Cost ol equity 9.4% WACD Tax rate 265% Cost ol debt 40% % equity % debt 28% WACC 7.9% some peat** &lee Ccerviry aag4 leaSer While our DCF framework for CNI translates to an implied P/E multiple of 15.5x our 2019 EPS estimate. Deutsche Bank Securities Inc Page 7 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0064277 CONFIDENTIAL SDNY_GM_00210461 EFTA01371091