Chap06_Worksheet1_Spreadsheet.sheets
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Discounted Cash Flow Example - Jimba Jomba Jumba Juice - Present Value
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YearCash FlowsPresent Value MultiplierPresent Value of Cash FlowComments $ 56.00 Current Market Price
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2018 $ 1.80 0.909 $ 1.636 $1.80 dividend10% Required Rate of Return
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2019 $ 2.00 0.826 $ 1.653 $2.00 dividend
We expect to receive cash flows in
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2020 $ 77.25 0.751 $ 58.039
$2.25 dividend + $75 estimated proceeds from sale of stock
the form of dividends and stock price.
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Total: $ 61.328 Present value of stock =SUM(discounted-cash-flows)
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Yes! It is a good value. We calculate
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the present value to be $61.33 and
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Present Value Multiplier = 1 / (1+Rate)Time
the current market price is only $56.
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The model is telling us that we can
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buy $61.33 of value for only $56.
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But remember that this is just our
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forecast. It is not a guarantee! We
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are simply tilting the odds in our favor
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that we will identify prudent, long-term
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oriented companies.
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PresentValue
InternalRateOfReturn
 
 
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