For each of the following scenarios, recalculate the intrinsic value of Chevron using the three-stage growth model of Spreadsheet 13.1(included with the question). Treat each scenario independently. (LO 13-2)

a. The terminal growth rate will be 3%.

b. Chevron's actual beta is 1.3.

c. The market risk premium is 7%.

		2019	2020	2021	2022	2023
A. Input data
P/E		14.90	14.93	14.95	14.98	15.00
Cap spending/share		8.00	8.50	9.33	10.17	11.00
LT Debt ($M)		25,000	26,000	27,333	28,667	30,000
Shares (million)		1,890	1,880	1,870	1,860	1,850
EPS		6.90	7.60	8.23	8.87	9.50
Working Capital		4,000	3,000	3,667	4,333	5,000
B. Cash flow calculations
Profits ($M, after tax)		13,050	14,325	15,417	16,508	17,600
Interest ($M, after tax)		691	719	756	793	830			= (1-tax_rate) x r_debt x LT Debt
Chg Working Cap ($M)			-1,000	667	667	667
Depreciation ($M)		17,100	18,000	19,333	20,667	22,000
Cap Spending ($M)			15,980	17,437	18,893	20,350
							Terminal value
FCFF ($M)			18,064	17,402	18,408	19,413	305,615		* Formulas > name manager
FCFE ($M)			18,345	17,980	18,948	19,917	273,692		assumes fixed debt ratio after 2023
			FCFF is discounted at the equity rate
C. Discount rate calculations
Current beta	1.2								from Value Line
Unlevered beta	1.089								current beta /[1 + (1-tax)*debt/equity)]
terminal growth	0.04
tax_rate	0.21
r_debt	0.035								YTM on LT debt
risk-free rate	0.02
market risk prem	0.08
MV equity		194,445				264,000			Row 3 x Row 11
Debt/Value		0.1139	0.1110	0.1080	0.1050	0.1020			linear trend from initial to final value
Levered beta		1.2000	1.1968	1.1935	1.1903	1.1871			unlevered beta x [1 + (1-tax)*debt/equity]
k_equity (cost of equity)		0.1160	0.1157	0.1155	0.1152	0.1150	0.1150		from CAPM and levered beta
WACC		0.1059	0.1060	0.1060	0.1060	0.1061	0.1061		(1-t)*r_debt*D/V + k_equity*(1-D/V)
PV factor for FCFF		1.0000	0.9042	0.8175	0.7392	0.6683	0.6683		Discount each year at WACC
PV factor for FCFE		1.0000	0.8963	0.8035	0.7205	0.6462	0.6462		Discount each year at k_equity
D. Present values									Intrinsic val	Equity val	Intrin/share
PV(FCFF)			16,333	14,227	13,606	12,973	204,236		261,375	236,375	125.07
PV(FCFE)			16,442	14,447	13,652	12,870	176,852		234,262	234,262	123.95