Question
Forecasting and Estimating Share Value Using the DCF Model Following are the income statement and balance sheet for Intel Corporation. INTEL CORPORATION Consolidated Statements of
Forecasting and Estimating Share Value Using the DCF Model Following are the income statement and balance sheet for Intel Corporation.
INTEL CORPORATION Consolidated Statements of Income | |||
---|---|---|---|
Year Ended (In millions) | Dec. 25, 2010 | Dec. 26, 2009 | Dec. 27, 2008 |
Net revenue | $ 44,223 | $ 35,127 | $ 37,586 |
Cost of sales | 15,132 | 15,566 | 16,742 |
Gross margin | 29,091 | 19,561 | 20,844 |
Research and development | 6,576 | 5,653 | 5,722 |
Marketing, general and administrative | 6,309 | 7,931 | 5,452 |
Restructuring and asset impairment charges | -- | 231 | 710 |
Amortization of acquisition-related intangibles | 18 | 35 | 6 |
Operating expenses | 12,903 | 13,850 | 11,890 |
Operating income | 16,188 | 5,711 | 8,954 |
Gains (losses) on equity method investments, net | 117 | (147) | (1,380) |
Gains (losses) on other equity investments, net | 231 | (23) | (376) |
Interest and other, net | 109 | 163 | 488 |
Income before taxes | 16,645 | 5,704 | 7,686 |
Provisions for taxes | 4,581 | 1,335 | 2,394 |
Net income | $ 12,064 | $ 4,369 | $ 5,292 |
INTEL CORPORATION Consolidated Balance Sheets | ||
---|---|---|
As of Year-Ended (In millions, except par value) | Dec. 25, 2010 | Dec. 26, 2009 |
Assets | ||
Current assets | ||
Cash and cash equivalents | $ 5,498 | $ 3,987 |
Short-term investments | 11,294 | 5,285 |
Trading assets | 5,093 | 4,648 |
Accounts receivables, net | 2,667 | 2,273 |
Inventories | 3,757 | 2,935 |
Deferred tax assets | 1,888 | 1,216 |
Other current assets | 1,614 | 813 |
Total current assets | 31,811 | 21,157 |
Property, plant and equipment, net | 17,899 | 17,225 |
Marketable equity securities | 1,008 | 773 |
Other long-term investments** | 3,026 | 4,179 |
Goodwill | 4,531 | 4,421 |
Other long-term assets | 5,111 | 5,340 |
Total assets | $63,386 | $53,095 |
Liabilities | ||
Current liabilities | ||
Short-term debt | $38 | $172 |
Accounts payable | 2,190 | 1,883 |
Accrued compensation and benefits | 2,888 | 2,448 |
Accrued advertising | 1,007 | 773 |
Deferred income on shipments to distributors | 622 | 593 |
Other accrued liabilities | 2,482 | 1,722 |
Total current liabilities | 9,227 | 7,591 |
Long-term income taxes payable | 190 | 193 |
Long-term debt | 1,677 | 2,049 |
Long-term deferred tax liabilities | 926 | 555 |
Other long-term liabilities | 1,236 | 1,003 |
Total liabilities | 13,256 | 11,391 |
Stockholders' equity: | ||
Preferred stock, $0.001 par value | -- | -- |
Common stock, $0.001 par value, 10,000 shares authorized; 5,581 issued and 5,511 outstanding and capital in excess of par value | 16,178 | 14,993 |
Accumulated other comprehensive income (loss) | 333 | 393 |
Retained earnings | 33,619 | 26,318 |
Total stockholders' equity | 50,130 | 41,704 |
Total liabilities and stockholders' equity | $ 63,386 | $ 53,09 |
(c) Forecast Intel's sales, NOPAT, and NOA for years 2011 through 2014 using the following assumptions:
Sales growth | 10% |
Net operating profit margin (NOPM) | 26% |
Net operating asset turnover (NOAT) at fiscal year-end | 1.50 |
Forecast the terminal period value using the assumptions above and assuming a terminal period growth of: 1%.
(d) Estimate the value of a share of Intel common stock using the discounted cash flow (DCF) model as of December 25, 2010; assume a discount rate (WACC) of 11%, common shares outstanding of 5,511 million, and net nonoperating obligations (NNO) of $(21,178) million (NNO is negative which means that Intel has net nonoperating investments). Use your rounded answers for subsequent calculations.
INTC | Reported | Forecast Horizon | Terminal | |||
---|---|---|---|---|---|---|
($ millions) | 2010 | 2011 Est. | 2012 Est. | 2013 Est. | 2014 Est. | Period |
Acummulated present value of horizon FCFF | $Answer | (rounded to nearest whole number) | ||||
Present value of terminal FCFF | Answer | (rounded to nearest whole number) | ||||
Total firm value | Answer | (rounded to nearest whole number) | ||||
Plus negative NNO | 21178 | |||||
Firm equity value | $Answer | (rounded to nearest whole number) | ||||
Shares outstanding (millions) | 5511 | |||||
Stock price per share | $Answer | (rounded to two decimal places) |
How to get Present value of terminal FCFF?
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