Equity Valuation and Analysis - Mark Moore

Ultimate health care cost trend
rate (assumed to be reached in
2011) 6% 6% 6% 6%
In relation to other companies the ultimate health care cost trend does not affect
Lyondell. “The health care cost trend rate assumption does not have a significant effect
on the amounts reported due to limits on Equistar’s maximum contribution level to the
medical plan”( Lyondell 10-k). Equistar being one of the companies that Lyondell had
merged with back in 2002. One of Dow’s other competitor’s however, DuPont will have
an initial health care cost rate of 10%, ultimately reaching its peak through the years
2011-2012. Another point of interest on DuPont’s 10-k was how if a single percentage
point went up or down effected total service, interest cost and also the effect on
postretirement benefit obligation.
1% point Increase 1% Point Decrease
Effect on total of service and interest cost
$6 ($3)
Effect on postretirement benefit obligation
$82 ($55)
In conclusion, the DOW corporation overall meets industry standards by giving
relatively high disclosure on key success factors such as growth, Research &
Development, product segmentation, and cost-reducing pension plans. With a few
exceptions (i.e. operating leases) and a wealth of accounting flexibility at their disposal,
DOW as a whole follows a reasonably conservative accounting strategy when
presenting information on their financial statements and therefore has the ability to
increase investor confidence in their firm.
Quality of Disclosure
The quality of information that is disclosed by a company plays an important role
in how financiers look at the information provided by the company in its financial
statements. The higher level of quality disclosure gives investors and lenders a more
Dow Chemical Analysis Page 48