barcode in vb.net source code How to Value a Stock in Software

Generate ECC200 in Software How to Value a Stock

How to Value a Stock
Scan DataMatrix In None
Using Barcode Control SDK for Software Control to generate, create, read, scan barcode image in Software applications.
ECC200 Creation In None
Using Barcode generator for Software Control to generate, create Data Matrix ECC200 image in Software applications.
EXHIBIT 4-2
Reading Data Matrix ECC200 In None
Using Barcode decoder for Software Control to read, scan read, scan image in Software applications.
Data Matrix Creation In C#.NET
Using Barcode creator for VS .NET Control to generate, create Data Matrix 2d barcode image in VS .NET applications.
Microsoft Five-year Stock Price Chart
Creating Data Matrix In Visual Studio .NET
Using Barcode encoder for ASP.NET Control to generate, create Data Matrix image in ASP.NET applications.
Paint Data Matrix In Visual Studio .NET
Using Barcode generator for .NET framework Control to generate, create Data Matrix 2d barcode image in .NET applications.
measures as The Five Chinese Brothers (taken from the Chinese folk tale of the same name). The cash flow measures and the initial estimates for Microsoft are: the revenue growth rate 11 percent, the net operating profit margin 42 percent, the net fixed capital investment rate (equal to the investment rate minus the depreciation rate see below), the incremental working capital investment rate 9.8 percent, and the company s income tax rate 32 percent. Briefly, these may be described as:
Drawing DataMatrix In VB.NET
Using Barcode drawer for .NET Control to generate, create ECC200 image in .NET applications.
UPC-A Supplement 2 Drawer In None
Using Barcode drawer for Software Control to generate, create UPC A image in Software applications.
The Five Chinese Brothers: Revenue Growth Rate Net Operating Profit Margin Tax Rate Working Capital Investment Fixed Capital Investment Annual Growth in Revenue Operating Income/Revenue Taxes/Pretax Income Change in Working Capital/Revenue Net Capital Investment/Revenue
Generating Data Matrix 2d Barcode In None
Using Barcode creation for Software Control to generate, create Data Matrix ECC200 image in Software applications.
Paint Bar Code In None
Using Barcode creation for Software Control to generate, create barcode image in Software applications.
To compute net capital investment, we have provided the depreciation rate 3.8 percent, depreciation divided by revenue, and the investment rate 2.7 percent, capital expenditures divided by revenue. We examined the historic ratios for Microsoft and used them in calculating the sample inputs listed above. We used analyst consensus estimates for Microsoft s projected growth rates. We show our sample
UCC-128 Encoder In None
Using Barcode maker for Software Control to generate, create GTIN - 128 image in Software applications.
Draw Code-128 In None
Using Barcode printer for Software Control to generate, create USS Code 128 image in Software applications.
STREETSMART GUIDE TO VALUING A STOCK
Draw Uniform Symbology Specification Codabar In None
Using Barcode printer for Software Control to generate, create Code 2 of 7 image in Software applications.
Printing UPC - 13 In VB.NET
Using Barcode printer for .NET Control to generate, create EAN-13 Supplement 5 image in .NET applications.
EXHIBIT 4-3
Making UPC Symbol In Java
Using Barcode drawer for Eclipse BIRT Control to generate, create GS1 - 12 image in BIRT reports applications.
UPC-A Decoder In .NET
Using Barcode reader for .NET Control to read, scan read, scan image in VS .NET applications.
Microsoft General Input Screen
Code 128 Code Set C Creation In Java
Using Barcode generation for Java Control to generate, create Code 128 Code Set A image in Java applications.
EAN / UCC - 13 Creator In Java
Using Barcode creation for BIRT reports Control to generate, create UCC.EAN - 128 image in BIRT applications.
inputs in Exhibit 4-3, the general input screen of the ValuePro 2002 software program. Our valuation spreadsheets will become more meaningful to the reader as we progress through the book. Net operating profit (NOP) for Microsoft during the excess return period is projected to grow more than 2.5 times, from $13,224 million in 2003 to $33,827 million in the year 2012. To convert from net operating profit to free cash flow to the firm, we must: (1) add depreciation (a noncash expense), and (2) subtract income taxes, incremental working capital and fixed capital investment. (Also see Exhibit 4-4.) Free cash flow (FCFF) projections for Microsoft (in millions of dollars) are:
Code128 Encoder In VB.NET
Using Barcode maker for .NET framework Control to generate, create USS Code 128 image in .NET framework applications.
Encoding Bar Code In None
Using Barcode drawer for Office Excel Control to generate, create bar code image in Microsoft Excel applications.
Year 2003 2004 $10,026 2005 $11,128 2006 $12,363 ... ... 2012 $23,104
FCFF $9,032
Step 2: Estimate Microsoft s Discount Rate The WACC
What is the appropriate rate to use to discount Microsoft s uncertain (but expected) cash flow There are several discounted cash flow methods used in the capital market. The method used in this book calculates the after-tax weighted average cost of capital (WACC) of the company and uses that WACC to discount the company s after-tax free cash flow. Again, we show you how to estimate a company s WACC long-
How to Value a Stock
EXHIBIT 4-4
Microsoft General Pro Forma Screen
hand, and if you use the ValuePro 2002 software, it automatically does all the work based on the inputs that you feed it. How do you calculate a WACC Finance theory (as discussed in Principle 10 describing the Capital Asset Pricing Model) tells us that a company s WACC discounting rate is a function of three general categories of risk/return adjustments required by the market: As a base rate of return for any investment, the market s current long-term risk-free rate of interest (which incorporates expectations of inflation). We use the current 10-year (the maturity coincides with the maximum length of our excess return period) U.S. Treasury bond yield. For the expected return associated with the company s debt and preferred stock, a spread above the risk-free rate that reflects the company s risk of default. For the expected return associated with the company s common stock, the market s assessment of the current equity risk premium and the systematic risk (beta) associated with the company s stock. To arrive at the company s WACC, the cost of capital inputs described above must be adjusted for two factors: the tax deductibility of interest payments; and the percentage of debt, preferred stock, and common stock employed by the company in financing its operations.
STREETSMART GUIDE TO VALUING A STOCK
While this calculation may seem complex, it is actually quite simple with a calculator or software such as ValuePro 2002. The discount rate that is used in the valuation process, and the movement of interest rates in general, can have an enormous effect on the market value of the stock.2 The discount rate that is used to value a stock reflects the three risk factors described previously. Investments with similar risks should have similar discount rates. Factors that reduced the discount rate, such as a decrease in interest rates due to expectations of lower inflation, or a decrease in the equity risk premium due to the fall of communism and an increase in free trade among nations, greatly increased stock market valuations in the 1990s. An important reason for the percentage increases in general stock market valuations, in excess of the growth rate of corporate earnings during the 1990s, was the significant reduction of interest rates and their related lowering of corporate WACCs. A lower WACC increases a stock s value. Conversely, factors that increase the discount rate, such as higher inflation, bogus corporate accounting, and restrictive government policies, will have a significant negative effect on stock market prices. Likewise, factors that increase the equity risk premium, such as terrorist attacks, production and distribution bottlenecks, and currency and trade crises, also will increase WACCs and negatively affect stock prices. A higher WACC reduces a stock s value. (We discuss all the WACCy stuff in detail in 6.) The WACC is easier to compute for Microsoft than for most firms since the company is financed completely by common stock. Microsoft has no debt or preferred stock outstanding. In this simple example, the WACC for Microsoft was entirely a function of its cost of common stock. The capitalization and the WACC for Microsoft looked like this:
Capital Source Debt Preferred Stock Common Stock WACC Capital Amount 0 0 $244,487 million Discounting Rate 0 0 10% 10%
At one point in time in 1999, Microsoft had a market capitalization of over $600 billion. Microsoft s stock price has been reduced by more
Copyright © OnBarcode.com . All rights reserved.