Intel Corporation is a leading manufacturer of semiconductor chips. The firm was incorporated in 1968 in Santa Clara, California, and represents one of the greatest success stories of the computer age. Although Intel continues to grow, the industry in which it operates has matured, so there is some question whether the firm should be evaluated as a high-growth company or stable-growth company from now on. For example, in December 2007, the firm?s shares were trading for $20.88, and has a price?earnings ratio of 17.622. Compared to Google Inc.?s price?earnings ratio of 53.71 on the same date, it would appear that the decision has already been made by the market.

Intel?s expected earnings for 2007 were $1.13 per share, and its payout ratio was 48%. Furthermore, selected financial data for the sector, industry, and seven of the largest firms (including Intel) are found in Exhibit P8-9.1 on page 301.

Alternate View

Sector: industrial goods	16.606	14.94%	1.48%	0.87	50.471	?5.40%	? 75.481
Industry: industrial ?equipment and components	15.900	18.40%	1.41%	0.649	10.11	?7.90%	?134.9
Emerson Electric Co.	$34.61B	19.276	23.72%	2.40%	0.494	?4.257	?9.54%	? 65.156
Parker-Hannifin Corp.	9.81B	14.150	18.16%	1.20%	0.308	?2.298	?8.25%	? 34.392
Roper Industries Inc.	4.44B	24.685	14.27%	0.50%	0.603	?3.122	11.89%	232.735
Pentair Inc.	3.23B	17.943	11.56%	1.70%	0.485	?1.974	?4.48%	147.667
Walter Industries Inc.	2.19B	23.537	15.70%	0.30%	4.036	?2.731	?7.38%	?10.682

PROBLEM 8-9 Given Beta Dividend payout ratio EPS for 2007 Stock Price (12/07/06) Anticipated growth rate in EPS (5 years) Description Sector: Technology Industry: Semiconductor - Broad Line Intel Corp. Texas Instruments Inc. STMicroelectronics NV Advanced Micro Devices Inc. Analog Devices Inc. Maxim Integrated Products Inc. National Semiconductor Corp. 1.66 48% 1.13 20.88 12% $ $ Market Cap 5344.81B 252.89B 120.51B 44.62B 16.35B 11.79B 11.48B 10.28B 8.04B P/E Return on Equity % 27.716 14.77% 19.9 16.20% 17.622 19.63% 11.08 22.94% 24.959 7.81% 21.152 12.61% 22.667 15.42% 23.025 16.93% 18.049 25.67% Solution Intel Comparison to Industry a. P/E ROE Dividend Yield LTD to Equity Price to Book Net Profit Margin Price to Cash Flow b. Estimated cost of equity Estimated growth rate DCF Estimate of Share Price c. Imputed growth rate d. Estimated future dividends Year 2007 $ 2008 2009 Earnings 1.13 Dividends 2010 2011 Future growth rate Value of Intel Shares (2-stage) 2007-2011 2011 and beyond Estimated equity value The growth rate in earnings that makes the value of Intel's shares $20.88 is found using Goal Seek. PROBLEM 8-9 Given Dividend Yield % 1.90% 1.30% 1.90% 0.50% 0.70% 0.00% 1.90% 1.90% 0.60% Solution Long-term Debt to Equity 0.691 0.096 0.064 0.004 0.209 0.138 NA NA 0.012 Price to Book Value Net Profit Margin 5.588 10.39% 3.42 15.50% 3.437 18.72% 3.71 18.67% 1.764 8.24% 2.088 10.13% 3.342 21.48% 3.681 21.39% 4.481 22.18% Price To Free Cash Flow 55.435 193.3 121.039 -5577.55 -11.219 -58.916 311.392 NA 154.483 h rate in earnings that makes the ntel's shares $20.88 is found using k. Solution Legend = Value given in problem = Formula/Calculation/Analysis required = Qualitative analysis or Short answer required = Goal Seek or Solver cell = Crystal Ball Input = Crystal Ball Output