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Equity Valuation Model. Free Cash Flow of Firm (FCFF) vs. Free Cash Flow of Equity (FCFE)
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A. Discount rate Inputs
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Current beta 1,3000
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Unlevered beta 1,1672
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terminal growth5,00%
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tax_rate21,00%
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r_debt4,10%
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risk-free rate2,80%
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market risk prem8,00%
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B. Cash Flows Input data
PY2022FY2023FY2024FY2025FY2026FY2027
Terminal Target
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P/E 10,50 10,88 11,16 11,44 11,72 12,00
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Cap spending/share 3,20 3,55 3,83 4,10 4,38 4,65
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LT Debt ($M) 13 000 14 000 15 000 16 000 17 000 18 000
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Shares (million) 1 700 1 680 1 672,5 1 665 1 657,5 1 650
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EPS 5,00 5,20 5,53 5,85 6,18 6,50
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Working Capital 5 000 6 000 7 000 8 000 9 000 10 000
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C. Discount ratePY2022FY2023FY2024FY2025FY2026FY2027
Terminal rates
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MV equity 90 300 97 920 106 020 114 400 123 060 132 000
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Debt/Value 0,1258 0,1251 0,1239 0,1227 0,1214 0,1200
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Levered beta 1,3000 1,2991 1,2977 1,2962 1,2946 1,2930
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 = k_equity13,2000%13,1927%13,1817%13,1697%13,1571%13,1439%
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 = WACC11,9464%11,9476%11,9493%11,9512%11,9532%11,9553%
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D. Cash flow calculations
PY2022FY2023FY2024FY2025FY2026FY2027Terminal CFs
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Net Income ($M, after tax)
 8 600 9 000 9 500 10 000 10 500 11 000
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Depreciation ($M) 4 200 4 400 4 675 4 950 5 225 5 500
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Interest ($M, after tax) 421 453 486 518 551 583
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Chg Working Cap ($M) 1 000 1 000 1 000 1 000 1 000
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Capex Spending ($M) 5 964 6 397 6 827 7 252 7 673
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 = FCFE ($M) 7 436 7 778 8 124 8 473 8 828 113 813
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 = FCFF ($M) 6 889 7 264 7 642 8 024 8 411 126 968
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PV(FCFE) Equity 6 569 6 071 5 603 5 165 4 756 61 313
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PV(FCFF) Firm 6 154 5 796 5 447 5 108 4 783 72 202
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E. Equity Present values
Intrinsic ValueEquity ValueEquity/shr
Market price/shr
Expected return
Buy/Hold/Sell
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Equity (by FCFE) 89 477 89 477 52,63 40 31,58%Buy
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Equity (by FCFF) 99 490 86 490 50,88 40 27,19%Buy
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