Question
Forecasting and Estimating Share Value Using the DCF Model (PLEASE SHOW WORK AND DONT USE PREVIOUS RESPONSE) Following are the income statement and balance sheet
Forecasting and Estimating Share Value Using the DCF Model (PLEASE SHOW WORK AND DONT USE PREVIOUS RESPONSE) 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 | $ 44,123 | $ 35,127 | $ 37,586 |
Cost of sales | 15,132 | 15,566 | 16,742 |
Gross margin | 28,991 | 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 | 16,088 | 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 | 16,545 | 5,704 | 7,686 |
Provisions for taxes | 4,581 | 1,335 | 2,394 |
Net income | $ 11,964 | $ 4,369 | $ 5,292 |
*This should be considered as operating income.
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 | 2,867 | 2,273 |
Inventories | 3,757 | 2,935 |
Deferred tax assets | 1,488 | 1,216 |
Other current assets | 1,614 | 813 |
Total current assets | 31,611 | 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 | $63,186 | $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 | 33,419 | 26,318 |
Total stockholders' equity | 49,930 | 41,704 |
Total liabilities and stockholders' equity | $ 63,186 | $ 53,095 |
** These investments are operating assets as they relate to associated companies. (a) Compute Intel's net operating assets (NOA) for year-end 2010. 2010 NOA = $Answer
(b) Compute net operating profit after tax (NOPAT) for 2010, assuming a federal and state statutory tax rate of 37%.
HINT: Gains/losses on equity method investments are considered operating income. Round your answer to the nearest whole number. 2010 NOPAT = $Answer
(c) Use the parsimonious forecast method, as shown in Analysis Insight box on page 13-4, to forecast Ciscos sales, NOPAT, and NOA for 2011 through 2014 and the terminal period using the following assumptions.
Sales growth | 10% |
Net operating profit margin (NOPM) | 26% |
Net operating asset turnover (NOAT) at fiscal year-end | 1.50 |
Forecast the terminal period value using the assumptions above and assuming a terminal period growth of: 1%.
INTC | Reported | Forecast Horizon | Terminal | |||
---|---|---|---|---|---|---|
($ millions) | 2010 | 2011 Est. | 2012 Est. | 2013 Est. | 2014 Est. | Period |
Sales (rounded two decimal places) | Answer | Answer | Answer | Answer | Answer | Answer |
Sales (rounded nearest whole number) | Answer | Answer | Answer | Answer | Answer | Answer |
NOPAT (rounded nearest whole number)* | Answer | Answer | Answer | Answer | Answer | Answer |
NOA (rounded nearest whole number)* | Answer | Answer | Answer | Answer | Answer | Answer |
* Use sales rounded to nearest whole number for this calculation.
(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 $(21,178) million (NNO is negative which means that Intel has net nonoperating investments).
Instructions:
-
Use your rounded answers for subsequent calculations.
-
Round all answers to the nearest whole number, except for discount factors and stock price per share.
- Round discount factors to 5 decimal places.
- Round stock price per share to two decimal places.
- Use a negative sign with your NNO answer.
INTC | Reported | Forecast Horizon | Terminal | |||
---|---|---|---|---|---|---|
($ millions) | 2010 | 2011 Est. | 2012 Est. | 2013 Est. | 2014 Est. | Period |
DCF Model | ||||||
Increase in NOA | Answer | Answer | Answer | Answer | Answer | |
FCFF (NOPAT - Increase in NOA) | Answer | Answer | Answer | Answer | Answer | |
Discount factor | Answer | Answer | Answer | Answer | ||
Present value of horizon FCFF | Answer | Answer | Answer | Answer | ||
Cu m present value of horizon FCFF | Answer | |||||
Present value of terminal FCFF | Answer | |||||
Total firm value | Answer | |||||
NNO | Answer | |||||
Firm equity value | Answer | |||||
Shares outstanding (millions) | Answer | |||||
Stock price per share | Answer |
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