Question
Using Excel only and the NPV function to discount back the total FCF values after finding the terminal value of Time 5 using the OCF
Using Excel only and the NPV function to discount back the total FCF values after finding the terminal value of Time 5 using the OCF (net income) of Time 6 * the PE (of 21).
Microsoft Co. has the following projected sales, costs, net investment, and free cash flow in millions. The anticipated growth rate in free cash flows after year 6 is 5% per year forever. There are 7.43 billion shares outstanding, and investors require a return of 8% on the company's stock and a comparable P/E ratio of 21. Calculate the company stock price using the P/E comparable approach to find the terminal value. (Round to 2 decimals)
($ in Billions) | 1 | 2 | 3 | 4 | 5 | 6 |
Sales | 232 | 244 | 256 | 269 | 282 | 296 |
Costs | 120 | 126 | 132 | 139 | 146 | 153 |
Taxes | 40 | 42 | 44 | 46 | 48 | 50 |
OCF (net income) | 72 | 76 | 80 | 84 | 88 | 92 |
Net investment | 50 | 53 | 55 | 58 | 61 | 64 |
FCF | 22 | 23 | 25 | 26 | 27 | 28 |
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