Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
Hi Hewitt,

I'm fairly new here and have a few questions about your analysis.

So instead, let's use 10% growth during years 1-5, followed by 5% growth in years 6-10. Terminal growth begins in year 11, at 3% a year. Assuming a 10% cost of equity, share dilution of 1% a year and adjusting for $787 million of net cash, I arrive at a best-case intrinsic value of $42. If your cost of equity is 11%, then best-case intrinsic value drops to $37. If share count stays flat and your cost of equity is 10%, then intrinsic value is $44.

Are the 10%, 5%, 3% growths pure guesses, or are they based on anything realistic? And what does "cost of equity" mean here? I guess I'm also not sure what your formula is for calculating intrinsic value.

These are probably pretty naive questions but I've got to start somewhere.

Thanks!
-Pedro
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.