Microsoft Corporation (MSFT)
Discount cash flow analysis
Sensitivity matrix
-1% |
Discount Rate % 0% |
1% |
||
---|---|---|---|---|
-1% | $33.32 | $32.81 | $32.33 | |
Terminal Growth% | 0 | $33.52 | $33.01 | $32.52 |
+1% | $33.73 | $33.21 | $32.71 |
How does a change in discount rate or terminal growth affect valuation?
This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate
Valuations and comments
- Valuecruncher created a new valuation of $45.85 (overvalued by 19.29%) - 4 years ago
- acrouse created a new valuation of $57.76 (undervalued by 50.22%) - almost 7 years ago
- TravisEz13 created a new valuation of $39.99 (undervalued by 17.83%) - over 7 years ago
- TravisEz13 created a new valuation of $35.65 (undervalued by 27.55%) - over 7 years ago
- mgood created a new valuation of $40.70 (undervalued by 33.05%) - over 8 years ago
- beatsj8 created a new valuation of $32.87 (undervalued by 27.35%) - almost 9 years ago
- bency123 created a new valuation of $31.14 (undervalued by 26.95%) - 9 years ago
- gsteens created a new valuation of $26.32 (overvalued by 8.55%) - almost 10 years ago
- PARKERTG created a new valuation of $31.72 (undervalued by 25.77%) - 10 years ago
- PARKERTG created a new valuation of $31.72 (undervalued by 25.77%) - 10 years ago
- JMILOSAK created a new valuation of $33.01 (undervalued by 14.74%) - almost 11 years ago
- ankallissankari created a new valuation of $28.80 (undervalued by 1.59%) - almost 11 years ago
- lausan created a new valuation of $31.53 (undervalued by 13.25%) - almost 11 years ago
- clp1001 created a new valuation of $31.00 (undervalued by 0.13%) - almost 11 years ago
- jfachl01 created a new valuation of $31.42 (undervalued by 4.8%) - almost 11 years ago
- Maela created a new valuation of $30.89 (undervalued by 4.29%) - 11 years ago
- Maela created a new valuation of $30.89 (undervalued by 4.29%) - 11 years ago
- smdet created a new valuation of $39.47 (undervalued by 42.34%) - 11 years ago
- smdet created a new valuation of $28.84 (undervalued by 4.0%) - 11 years ago
- smdet created a new valuation of $39.49 (undervalued by 42.41%) - 11 years ago
- tweakie created a new valuation of $42.81 (undervalued by 64.91%) - 11 years ago
- carswelli created a new valuation of $34.93 (undervalued by 48.26%) - over 11 years ago
- mindracer created a new valuation of $29.77 (undervalued by 26.95%) - over 11 years ago
- GordonGekko created a new valuation of $29.43 (undervalued by 19.98%) - over 11 years ago
- GordonGekko created a new valuation of $27.61 (undervalued by 13.67%) - over 11 years ago
- woyeyele created a new valuation of $19.98 (overvalued by 10.76%) - over 11 years ago
- babsle16 created a new valuation of $23.76 (undervalued by 7.32%) - over 11 years ago
- GordonGekko created a new valuation of $23.15 (undervalued by 22.03%) - over 11 years ago
- swampler created a new valuation of $21.71 (undervalued by 10.37%) - over 11 years ago
- SethWellbourne created a new valuation of $21.68 (undervalued by 24.03%) - over 11 years ago
- savov created a new valuation of $22.46 (undervalued by 22.53%) - over 11 years ago
- savov created a new valuation of $22.46 (undervalued by 22.53%) - over 11 years ago
- savov created a new valuation of $23.09 (undervalued by 25.97%) - over 11 years ago
- rileyj98 created a new valuation of $25.50 (undervalued by 49.47%) - over 11 years ago
- afi created a new valuation of $25.48 (undervalued by 53.03%) - over 11 years ago
- balli created a new valuation of $25.47 (undervalued by 68.12%) - over 11 years ago
- thecatpreacher created a new valuation of $25.47 (undervalued by 68.12%) - over 11 years ago
- rs12345 created a new valuation of $15.23 (overvalued by 0.26%) - over 11 years ago
- rs12345 created a new valuation of $15.34 (undervalued by 0.46%) - over 11 years ago
- rs12345 created a new valuation of $12.79 (overvalued by 16.24%) - over 11 years ago
- rs12345 created a new valuation of $15.23 (overvalued by 0.26%) - over 11 years ago
- freecashsurfing created a new valuation of $27.14 (undervalued by 37.7%) - almost 12 years ago
- GordonGekko created a new valuation of $25.34 (undervalued by 32.46%) - almost 12 years ago
- GordonGekko created a new valuation of $25.79 (undervalued by 25.19%) - almost 12 years ago
- GordonGekko created a new valuation of $25.26 (undervalued by 27.13%) - almost 12 years ago
- sridhariyer27 created a new valuation of $24.16 (undervalued by 6.81%) - 12 years ago
- GordonGekko created a new valuation of $30.86 (undervalued by 40.53%) - 12 years ago
- TheCrunchBlog created a new valuation of $30.86 (undervalued by 25.6%) - 12 years ago
- GordonGekko created a new valuation of $32.67 (undervalued by 18.28%) - 12 years ago
- GordonGekko created a new valuation of $31.85 (undervalued by 14.16%) - over 12 years ago
- andrew created a new valuation of $23.54 (overvalued by 22.62%) - over 12 years ago
- lancewiggs created a new valuation of $16.30 (overvalued by 45.36%) - over 12 years ago
- KiwiEMH created a new valuation of $30.46 (undervalued by 1.77%) - over 12 years ago
- acoy created a new valuation of $25.84 (overvalued by 15.14%) - over 12 years ago
- GordonGekko created a new valuation of $28.82 (undervalued by 6.27%) - over 12 years ago
- contrarian created a new valuation of $32.81 (undervalued by 7.75%) - over 12 years ago
- KiwiEMH created a new valuation of $34.73 (undervalued by 25.15%) - over 12 years ago
- matrixxx created a new valuation of $32.50 (undervalued by 18.14%) - over 12 years ago
- GordonGekko created a new valuation of $31.17 (undervalued by 13.3%) - over 12 years ago
- TheCrunchBlog created a new valuation of $33.01 (undervalued by 19.99%) - over 12 years ago
- KiwiEMH created a new valuation of $27.29 (undervalued by 1.0%) - over 12 years ago
- Ashkat created a new valuation of $46.69 (undervalued by 71.09%) - over 12 years ago
- KiwiEMH created a new valuation of $27.21 (overvalued by 0.29%) - over 12 years ago
- jeremy created a new valuation of $35.04 (undervalued by 15.19%) - over 12 years ago
Comments
The boring details
All amounts in millions | Figures |
Enterprise Value: | 505,677 |
Net Debt (Long-term borrowings less cash): | -23,411 |
Equity Value: | 256,208 |
Number of Shares Outstanding: | 9,313,000,000 |
Calculated value per share: | $33.01 |
Enterprise Value is the present value of the post-tax cash flows for a business into the future.
Where:
- C1, C2, C3 - the cash flow in period 1, 2, 3, ...
- r - the discount rate
To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.
Where:
- Cn - the cash flow in the final forecast period.
- LTG - the long-term growth rate
- r - the discount rate
- g - the terminal growth rate
The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.
Where:
- rt - the risk free rate
- t - the tax rate
- B - the beta of the company
- MRP - the Market Risk Premium
Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.
This valuation is part of this blog post:
http://blog.valuecruncher.com/2008/07/as-microsoft-assesses-their-options-what-about-the-core/
Microsoft grew revenues from US$36.8 billion in 2004 to US$51.1 billion in 2007 – an 11.5% compound annual growth rate. Our assumptions of revenues for the next three years are US$60.0 billion in 2008 growing to US$74.0 billion in 2010 – a 13.1% compound annual growth rate. We have projected EBITDA margins to be flat at 40%. We have used a terminal growth rate of 4.5%. We calculated this terminal growth rate based on year three growth of 10.4% dropping to a 4% stable growth rate by year 10. We used a terminal capital expenditure number of US$3.0 billion. We have used a WACC (discount rate) of 10.5%. Both the terminal growth rate and WACC have a material impact on the valuation.