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Posted on Jul 30, 2024

1. For each year, Calculate FCF using FCF Equation shown in your readings. Source: Text book. 2. Find the grwoth of the FCF for each

1. For each year, Calculate FCF using FCF Equation shown in your readings. Source: Text book. 2. Find the grwoth of the FCF for each year: E.G. (FCF1-FCFO)/FCFO, (FCF2-FCF1)/FCF1, etc 3. Call the g1, 92, 93, and g4. (For five year data, you will have 4 g). No g for the first year. 4. Take average of these g: AVG (g) = (gl+g2+g3+g4)/4 5. Forecast FCF1,FCF2, FCF3, FCF4, and FCF5 using this AVG(g) 6. For example: You have data until 2019, so FCF1 = FCF of 2020. FCF1 = FCF19*(1+AVG(g)), FCF2 = FCF1*(1+AVG(g)), and so on. 7. You will calculate FCF for 2020, 2021, 2022, 2023, and 2024. 8. Then you calculate Horizon Value (Terminal Value). For that consider GDP growth rate as g. As a constant growth rate. Take the average of the gdp gdp growth rate from last 15 years. First we need FCF for 2025. It is FCF (2024)*(1+GPD Grwoth rate). Call it FCF2025. Horizon Value = FCF2025/(WACC-g) Where WACC is the weighted average cost of capital, and g is the GDP growth rate. 9. Find the PV of all FCF and HV. Using PV method. It is called Vo. Vo = PV of FCFS + PV of HV. 10. Then subtract Debt payments, preferred stocks and add (if any) Short term Investments). It is known as Value of Equity. If you divide this number by No of shares outstanding, you get price per share. Please note: if you have no short term investment and or preferred stock You can onore them F13 fx B D 2015 4560 2016 2017 4980 5360 0.092105 0.076305 E F G H 2018 2019 2020F 2021F 2022 2023F 2024 2025F 5730 5940 634.91751105222061351742559 8272.925 9521115 0.06903 0.036649 0.068522 6.85% HV 121730.2 2 2 FCF 3 growth rate 4 5 Aug (g) G 7 Forecast FCF | GDP 9 10 11 12 13 14 15 LG 3% 10% 5269.9 5604.671 5444.174 5288.272 5136.835 75584.86 V PV(FCF2020-FCF2024), and PV(HV) 102828.7 1. For each year, Calculate FCF using FCF Equation shown in your readings. Source: Text book. 2. Find the grwoth of the FCF for each year: E.G. (FCF1-FCFO)/FCFO, (FCF2-FCF1)/FCF1, etc 3. Call the g1, 92, 93, and g4. (For five year data, you will have 4 g). No g for the first year. 4. Take average of these g: AVG (g) = (gl+g2+g3+g4)/4 5. Forecast FCF1,FCF2, FCF3, FCF4, and FCF5 using this AVG(g) 6. For example: You have data until 2019, so FCF1 = FCF of 2020. FCF1 = FCF19*(1+AVG(g)), FCF2 = FCF1*(1+AVG(g)), and so on. 7. You will calculate FCF for 2020, 2021, 2022, 2023, and 2024. 8. Then you calculate Horizon Value (Terminal Value). For that consider GDP growth rate as g. As a constant growth rate. Take the average of the gdp gdp growth rate from last 15 years. First we need FCF for 2025. It is FCF (2024)*(1+GPD Grwoth rate). Call it FCF2025. Horizon Value = FCF2025/(WACC-g) Where WACC is the weighted average cost of capital, and g is the GDP growth rate. 9. Find the PV of all FCF and HV. Using PV method. It is called Vo. Vo = PV of FCFS + PV of HV. 10. Then subtract Debt payments, preferred stocks and add (if any) Short term Investments). It is known as Value of Equity. If you divide this number by No of shares outstanding, you get price per share. Please note: if you have no short term investment and or preferred stock You can onore them F13 fx B D 2015 4560 2016 2017 4980 5360 0.092105 0.076305 E F G H 2018 2019 2020F 2021F 2022 2023F 2024 2025F 5730 5940 634.91751105222061351742559 8272.925 9521115 0.06903 0.036649 0.068522 6.85% HV 121730.2 2 2 FCF 3 growth rate 4 5 Aug (g) G 7 Forecast FCF | GDP 9 10 11 12 13 14 15 LG 3% 10% 5269.9 5604.671 5444.174 5288.272 5136.835 75584.86 V PV(FCF2020-FCF2024), and PV(HV) 102828.7