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URL:  http://boards.fool.com/joe-here-is-my-biggest-weakness-i-dont-know-29287875.aspx

Subject:  Re: Discounted Cash Flow Model - Negative FCF Date:  5/9/2011  12:06 PM
Author:  atta9508 Number:  1653 of 1670

Joe – Here is my biggest weakness. I don't know enough about company evaluation so don't have a good intuative sense of what makes a company a good investment. For Tyson I looked at whether the majority of analysts rated Tyson as a buy. They did so I decided to take a closer look.

Here are some of my assumptions.
Cost of Borrowing: 4.8% (Assumed default spread of 1.6%, added to T-Bond Rate)
Beta: .8
Market Risk Premium: 4%
Growth Rate of EBIT = 3.5% per year and 3.5 after year 10
Reinvestment Rate: Starting at 8% and changing to near industry average in 10 years (20%)
For now I have excluded operating leases.

It seemed to me that I have assumed a pretty conservative growth rate and normal reinvestment rate and they still appear undervalued, so a buy to me. Let me know if you need other information. Also feel ask questions. I am new to this.

Thanks,

Jared
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