homedepot

목차

1. Calculate FCFs of the firm during 2008-2012, and then calculate the average annual growth rate of FCF over the period.
2. Based on the growth rate and industry characteristics, forecast the growth rate of FCF in the future.
3. Calculate WACC of the firm.
4. As of the end of 2012, calculate the firm value and subtract BV of debt from the firm value to get equity value.
5. Using the number of shares outstanding as of the end of 2012, calculate stock price.
6. How different is the stock price you have calculated in question 5 from the actual stock price at the end of 2012?

본문내용

2. Based on the growth rate and industry characteristics, forecast the growth rate of FCF in the future.
Geometric mean of FCF growth rate is 8.93%
This is far greater than professional forecasts. According to Global Home Improvement Retail Industry 2012-2017: Trends, Profits and Forecast Analysis, home improvement industry is expected to grow by 3% every year.
Our team believes that year 2012’s FCF contributed a lot in exaggerated growth rate. Compared to 2011, FCF increased significantly. This is largely due to an increase in “installments of long-term debt”, under current liabilities. In 2009

<중 략>

Equity value of Home Depot at the end of 2012 = 92,903,000,000①
The number of shares outstanding at the end of 2012 = 1,484,000,000②
Stock price of Home Depot at the end of 2012 (Intrinsic stock value) = ①/② = $62.60
6. How different is the stock price you have calculated in question 5 from the actual stock price at the end of 2012?
Stock price of Home Depot at the end of 2012 (Intrinsic stock value) = $62.60
Actual stock price at the end of 2012 = $61.51
Difference = 62.60-61.51 = 1.09
Intrinsic value is sum of discounted future cash flows. So, it is also called fundamental value. It is separate concept with market price. If market was fully efficient, in other words, if information of future cash flows was accurate and demand and supply of stock was in equilibrium

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