Question
Calculate the Intrinsic Value of Google Cash Flow from Operations $53,971,000 CAPITAL EXPENDITURES = $24,915,000. INTEREST = $86,000 Tax Rate: 13.66% TTM Free Cash Flows:
Calculate the Intrinsic Value of Google
Cash Flow from Operations $53,971,000
CAPITAL EXPENDITURES = $24,915,000.
INTEREST = $86,000
Tax Rate: 13.66%
TTM Free Cash Flows: $29,129,252.40
WACC: 12%
- Conduct a two-stage valuation
- You can now combine the two items above toestimate a present valueof the firm. You should calculate a high-growth phase value and a terminal value.
- High Growth Phase Value:For this phase, assume that in years 1 - 3 the Free Cash Flows are growing by 8% annually.
- Terminal Value:For this phase assume the FCF grow at a constant growth rate of 2.5%.
- Calculate the present values of the above phases and add them together for the total present value of the company.
- Conduct a Sensitivity Analysis:
- Vary the following inputs to the two-tier valuation model and indicate the new valuation amount and the percentage change from the above "base" case.
- Free Cash Flows
- Increase the FCF by 10%
- Decrease the FCF by 10%
- Terminal Growth Rate
- Increase the Terminal Growth Rate from 2.5% to 3.5%
- Decrease the Terminal Growth Rate from 2.5% to 1.5%
- WACC
- Add 2% to the WACC (that is if the WACC is 7.5% make it 9.5%)
- Subtract 2% from the WACC (that is if the WACC is 7.5% make it 5.5%
Revenues
$161.857B - 2019
$138.819B - 2018
110.855B - 2017
Gross Profit
$89.961B - 2019
$77.270B - 2018
$65.272B - 2017
Operating Income
$35.928B - 2019
$31.392B - 2018
$28.882B - 2017
Net Income
$33.343B - 2019
$30.736B - 2018
$12.662B -2017
*(Yahoo Finance, 2020)
Balance Sheet
Total Current Assets
$275.909B - 2019
$232.792B - 2018
$197.295B - 2017
Total Assets
$152.578B - 2019
$135.676B - 2018
$124.308B - 2017
Total Liabilities
$74.467B - 2019
$55.164B - 2018
$44.793B - 2017
Total Stockholder Equity
$201.442B - 2019
$177.628B - 2018
$152.502B - 2017
*(Yahoo Finance, 2020)
Market Cap
$958.95b
Revenue:
$166.68B
Net Income
$34.52B
Profit Margin
20.71%
Operating Margin
21.69%
Total Cash
$117.23B
Total Debt
$16.8B
Current Ratio
3.66
Calculations thus far - not sure on accuracy
Free Cash Flow - Year 1
$31,380,480
Free Cash Flow - Year 2
$33,890,918
Free Cash Flow - Year 3
$36,602,192
Growth Rate after 3 Years
2.5%
WACC
12%
Terminal Value of Company - Year 3
$394,918,387
Year Particulars Amount$ PV @ 12% PV
1 FCF $31,380,480 0.8929 $28,018,286
2 FCF $33,890,918 0.7972 $27,017,633
3 FCF $36,602,192 0.7118 $26,052,717
3 Terminal Value $394,918,387 0.7118 $281,095,108
Present Value of Google based on FCF $362,183,743
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Multinational financial management
Authors: Alan c. Shapiro
10th edition
9781118801161, 1118572386, 1118801164, 978-1118572382
