Intrinsic value of Brookfield Asset Management Inc. Class A - BAM-A

Previous Close

$51.10

  Intrinsic Value

$418.81

stock screener

  Rating & Target

str. buy

+720%

Previous close

$51.10

 
Intrinsic value

$418.81

 
Up/down potential

+720%

 
Rating

str. buy

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of BAM-A stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Brookfield Asset Management Inc. Class A (BAM-A) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  22.59
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  32,981
  52,770
  81,529
  121,927
  176,909
  249,594
  343,134
  460,586
  604,778
  778,203
  982,933
  1,220,580
  1,492,276
  1,798,695
  2,140,092
  2,516,368
  2,927,140
  3,371,820
  3,849,689
  4,359,973
  4,901,904
  5,474,776
  6,077,989
  6,711,087
  7,373,781
  8,065,969
  8,787,748
  9,539,416
  10,321,480
  11,134,648
  11,979,832
Variable operating expenses, $m
 
  39,587
  60,884
  90,798
  131,513
  185,336
  254,603
  341,576
  448,351
  576,773
  728,376
  903,844
  1,105,035
  1,331,939
  1,584,745
  1,863,378
  2,167,556
  2,496,843
  2,850,707
  3,228,574
  3,629,876
  4,054,089
  4,500,770
  4,969,581
  5,460,308
  5,972,876
  6,507,355
  7,063,968
  7,643,089
  8,245,243
  8,871,104
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  28,937
  39,587
  60,884
  90,798
  131,513
  185,336
  254,603
  341,576
  448,351
  576,773
  728,376
  903,844
  1,105,035
  1,331,939
  1,584,745
  1,863,378
  2,167,556
  2,496,843
  2,850,707
  3,228,574
  3,629,876
  4,054,089
  4,500,770
  4,969,581
  5,460,308
  5,972,876
  6,507,355
  7,063,968
  7,643,089
  8,245,243
  8,871,104
Operating income, $m
  4,044
  13,182
  20,645
  31,128
  45,396
  64,258
  88,531
  119,009
  156,427
  201,430
  254,557
  316,737
  387,241
  466,756
  555,347
  652,989
  759,583
  874,976
  998,982
  1,131,399
  1,272,028
  1,420,687
  1,577,219
  1,741,506
  1,913,473
  2,093,093
  2,280,392
  2,475,448
  2,678,391
  2,889,406
  3,108,728
EBITDA, $m
  6,773
  17,785
  27,478
  41,094
  59,625
  84,122
  115,649
  155,235
  203,833
  262,283
  331,285
  411,381
  502,953
  606,227
  721,290
  848,109
  986,555
  1,136,428
  1,297,488
  1,469,473
  1,652,124
  1,845,203
  2,048,508
  2,261,885
  2,485,238
  2,718,531
  2,961,797
  3,215,137
  3,478,722
  3,752,790
  4,037,648
Interest expense (income), $m
  4,137
  4,070
  9,090
  16,388
  26,639
  40,591
  59,035
  82,772
  112,576
  149,166
  193,174
  245,126
  305,431
  374,376
  452,132
  538,764
  634,247
  738,484
  851,325
  972,588
  1,102,077
  1,239,596
  1,384,967
  1,538,037
  1,698,691
  1,866,855
  2,042,503
  2,225,660
  2,416,402
  2,614,857
  2,821,205
Earnings before tax, $m
  4,044
  9,113
  11,556
  14,741
  18,757
  23,666
  29,496
  36,238
  43,851
  52,264
  61,383
  71,610
  81,810
  92,380
  103,215
  114,225
  125,336
  136,492
  147,657
  158,811
  169,952
  181,091
  192,252
  203,468
  214,782
  226,239
  237,889
  249,788
  261,989
  274,549
  287,523
Tax expense, $m
  -466
  2,460
  3,120
  3,980
  5,065
  6,390
  7,964
  9,784
  11,840
  14,111
  16,573
  19,335
  22,089
  24,942
  27,868
  30,841
  33,841
  36,853
  39,867
  42,879
  45,887
  48,894
  51,908
  54,936
  57,991
  61,084
  64,230
  67,443
  70,737
  74,128
  77,631
Net income, $m
  2,231
  6,652
  8,436
  10,761
  13,693
  17,277
  21,532
  26,453
  32,011
  38,153
  44,809
  52,276
  59,721
  67,437
  75,347
  83,384
  91,495
  99,639
  107,790
  115,932
  124,065
  132,196
  140,344
  148,532
  156,791
  165,154
  173,659
  182,345
  191,252
  200,421
  209,892

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  5,808
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  215,938
  336,112
  519,293
  776,603
  1,126,812
  1,589,768
  2,185,565
  2,933,668
  3,852,092
  4,956,706
  6,260,722
  7,774,397
  9,504,945
  11,456,655
  13,631,158
  16,027,820
  18,644,203
  21,476,558
  24,520,313
  27,770,530
  31,222,319
  34,871,183
  38,713,306
  42,745,777
  46,966,758
  51,375,600
  55,972,914
  60,760,610
  65,741,908
  70,921,327
  76,304,660
Adjusted assets (=assets-cash), $m
  210,130
  336,112
  519,293
  776,603
  1,126,812
  1,589,768
  2,185,565
  2,933,668
  3,852,092
  4,956,706
  6,260,722
  7,774,397
  9,504,945
  11,456,655
  13,631,158
  16,027,820
  18,644,203
  21,476,558
  24,520,313
  27,770,530
  31,222,319
  34,871,183
  38,713,306
  42,745,777
  46,966,758
  51,375,600
  55,972,914
  60,760,610
  65,741,908
  70,921,327
  76,304,660
Revenue / Adjusted assets
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
  0.157
Average production assets, $m
  63,408
  101,476
  156,780
  234,465
  340,197
  479,969
  659,846
  885,707
  1,162,989
  1,496,484
  1,890,181
  2,347,176
  2,869,647
  3,458,890
  4,115,396
  4,838,975
  5,628,890
  6,484,009
  7,402,952
  8,384,229
  9,426,362
  10,527,994
  11,687,973
  12,905,420
  14,179,781
  15,510,859
  16,898,838
  18,344,297
  19,848,205
  21,411,929
  23,037,216
Working capital, $m
  0
  10,079
  15,572
  23,288
  33,790
  47,672
  65,539
  87,972
  115,513
  148,637
  187,740
  233,131
  285,025
  343,551
  408,758
  480,626
  559,084
  644,018
  735,291
  832,755
  936,264
  1,045,682
  1,160,896
  1,281,818
  1,408,392
  1,540,600
  1,678,460
  1,822,028
  1,971,403
  2,126,718
  2,288,148
Total debt, $m
  90,594
  189,369
  341,409
  554,976
  845,650
  1,229,904
  1,724,415
  2,345,340
  3,107,632
  4,024,462
  5,106,795
  6,363,145
  7,799,500
  9,419,419
  11,224,257
  13,213,487
  15,385,085
  17,735,939
  20,262,255
  22,959,936
  25,824,921
  28,853,478
  32,042,440
  35,389,391
  38,892,805
  42,552,144
  46,367,915
  50,341,703
  54,476,180
  58,775,097
  63,243,264
Total liabilities, $m
  180,198
  278,973
  431,013
  644,580
  935,254
  1,319,508
  1,814,019
  2,434,944
  3,197,236
  4,114,066
  5,196,399
  6,452,749
  7,889,104
  9,509,023
  11,313,861
  13,303,091
  15,474,689
  17,825,543
  20,351,859
  23,049,540
  25,914,525
  28,943,082
  32,132,044
  35,478,995
  38,982,409
  42,641,748
  46,457,519
  50,431,307
  54,565,784
  58,864,701
  63,332,868
Total equity, $m
  35,740
  57,139
  88,280
  132,023
  191,558
  270,261
  371,546
  498,724
  654,856
  842,640
  1,064,323
  1,321,647
  1,615,841
  1,947,631
  2,317,297
  2,724,729
  3,169,515
  3,651,015
  4,168,453
  4,720,990
  5,307,794
  5,928,101
  6,581,262
  7,266,782
  7,984,349
  8,733,852
  9,515,395
  10,329,304
  11,176,124
  12,056,626
  12,971,792
Total liabilities and equity, $m
  215,938
  336,112
  519,293
  776,603
  1,126,812
  1,589,769
  2,185,565
  2,933,668
  3,852,092
  4,956,706
  6,260,722
  7,774,396
  9,504,945
  11,456,654
  13,631,158
  16,027,820
  18,644,204
  21,476,558
  24,520,312
  27,770,530
  31,222,319
  34,871,183
  38,713,306
  42,745,777
  46,966,758
  51,375,600
  55,972,914
  60,760,611
  65,741,908
  70,921,327
  76,304,660
Debt-to-equity ratio
  2.535
  3.310
  3.870
  4.200
  4.410
  4.550
  4.640
  4.700
  4.750
  4.780
  4.800
  4.810
  4.830
  4.840
  4.840
  4.850
  4.850
  4.860
  4.860
  4.860
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.870
  4.880
Adjusted equity ratio
  0.142
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170
  0.170

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,231
  6,652
  8,436
  10,761
  13,693
  17,277
  21,532
  26,453
  32,011
  38,153
  44,809
  52,276
  59,721
  67,437
  75,347
  83,384
  91,495
  99,639
  107,790
  115,932
  124,065
  132,196
  140,344
  148,532
  156,791
  165,154
  173,659
  182,345
  191,252
  200,421
  209,892
Depreciation, amort., depletion, $m
  2,729
  4,603
  6,833
  9,965
  14,229
  19,865
  27,118
  36,225
  47,406
  60,853
  76,728
  94,644
  115,712
  139,471
  165,943
  195,120
  226,971
  261,452
  298,506
  338,074
  380,095
  424,516
  471,289
  520,380
  571,765
  625,438
  681,405
  739,689
  800,331
  863,384
  928,920
Funds from operations, $m
  3,156
  11,255
  15,269
  20,726
  27,922
  37,141
  48,650
  62,678
  79,417
  99,006
  121,538
  146,920
  175,433
  206,908
  241,290
  278,504
  318,467
  361,091
  406,296
  454,006
  504,160
  556,712
  611,633
  668,912
  728,556
  790,592
  855,064
  922,035
  991,583
  1,063,805
  1,138,812
Change in working capital, $m
  -1,009
  3,780
  5,493
  7,716
  10,502
  13,883
  17,866
  22,433
  27,541
  33,124
  39,104
  45,391
  51,894
  58,526
  65,207
  71,869
  78,457
  84,934
  91,273
  97,464
  103,509
  109,418
  115,214
  120,922
  126,575
  132,208
  137,860
  143,569
  149,374
  155,315
  161,430
Cash from operations, $m
  4,165
  7,476
  9,776
  13,010
  17,420
  23,259
  30,783
  40,245
  51,876
  65,882
  82,434
  101,529
  123,539
  148,383
  176,083
  206,636
  240,009
  276,158
  315,023
  356,541
  400,651
  447,294
  496,419
  547,990
  601,982
  658,384
  717,204
  778,466
  842,209
  908,490
  977,382
Maintenance CAPEX, $m
  0
  -2,557
  -4,092
  -6,322
  -9,454
  -13,718
  -19,354
  -26,607
  -35,714
  -46,895
  -60,342
  -76,217
  -94,644
  -115,712
  -139,471
  -165,943
  -195,120
  -226,971
  -261,452
  -298,506
  -338,074
  -380,095
  -424,516
  -471,289
  -520,380
  -571,765
  -625,438
  -681,405
  -739,689
  -800,331
  -863,384
New CAPEX, $m
  -1,989
  -38,068
  -55,304
  -77,685
  -105,732
  -139,772
  -179,878
  -225,860
  -277,282
  -333,495
  -393,697
  -456,995
  -522,472
  -589,243
  -656,506
  -723,579
  -789,915
  -855,119
  -918,943
  -981,276
  -1,042,133
  -1,101,632
  -1,159,979
  -1,217,447
  -1,274,361
  -1,331,078
  -1,387,980
  -1,445,458
  -1,503,909
  -1,563,723
  -1,625,288
Cash from investing activities, $m
  -11,561
  -40,625
  -59,396
  -84,007
  -115,186
  -153,490
  -199,232
  -252,467
  -312,996
  -380,390
  -454,039
  -533,212
  -617,116
  -704,955
  -795,977
  -889,522
  -985,035
  -1,082,090
  -1,180,395
  -1,279,782
  -1,380,207
  -1,481,727
  -1,584,495
  -1,688,736
  -1,794,741
  -1,902,843
  -2,013,418
  -2,126,863
  -2,243,598
  -2,364,054
  -2,488,672
Free cash flow, $m
  -7,396
  -33,150
  -49,621
  -70,996
  -97,766
  -130,231
  -168,448
  -212,222
  -261,120
  -314,508
  -371,605
  -431,683
  -493,577
  -556,572
  -619,894
  -682,887
  -745,026
  -805,933
  -865,372
  -923,241
  -979,556
  -1,034,434
  -1,088,076
  -1,140,746
  -1,192,759
  -1,244,459
  -1,296,213
  -1,348,397
  -1,401,389
  -1,455,564
  -1,511,290
Issuance/(repayment) of debt, $m
  5,056
  104,583
  152,040
  213,567
  290,674
  384,254
  494,511
  620,925
  762,292
  916,830
  1,082,334
  1,256,350
  1,436,355
  1,619,919
  1,804,838
  1,989,230
  2,171,598
  2,350,855
  2,526,316
  2,697,681
  2,864,985
  3,028,557
  3,188,962
  3,346,951
  3,503,414
  3,659,339
  3,815,771
  3,973,788
  4,134,477
  4,298,917
  4,468,167
Issuance/(repurchase) of shares, $m
  119
  14,747
  22,705
  32,982
  45,843
  61,426
  79,754
  100,724
  124,121
  149,632
  176,873
  205,049
  234,472
  264,354
  294,319
  324,048
  353,290
  381,861
  409,649
  436,605
  462,740
  488,111
  512,817
  536,988
  560,776
  584,349
  607,884
  631,563
  655,569
  680,080
  705,275
Cash from financing (excl. dividends), $m  
  10,303
  119,330
  174,745
  246,549
  336,517
  445,680
  574,265
  721,649
  886,413
  1,066,462
  1,259,207
  1,461,399
  1,670,827
  1,884,273
  2,099,157
  2,313,278
  2,524,888
  2,732,716
  2,935,965
  3,134,286
  3,327,725
  3,516,668
  3,701,779
  3,883,939
  4,064,190
  4,243,688
  4,423,655
  4,605,351
  4,790,046
  4,978,997
  5,173,442
Total cash flow (excl. dividends), $m
  2,915
  86,180
  125,125
  175,553
  238,750
  315,449
  405,817
  509,427
  625,293
  751,953
  887,602
  1,029,716
  1,177,250
  1,327,701
  1,479,262
  1,630,391
  1,779,862
  1,926,783
  2,070,593
  2,211,045
  2,348,169
  2,482,234
  2,613,703
  2,743,192
  2,871,432
  2,999,229
  3,127,442
  3,256,954
  3,388,657
  3,523,433
  3,662,152
Retained Cash Flow (-), $m
  -1,548
  -21,399
  -31,141
  -43,743
  -59,536
  -78,703
  -101,285
  -127,177
  -156,132
  -187,784
  -221,683
  -257,325
  -294,193
  -331,791
  -369,666
  -407,433
  -444,785
  -481,500
  -517,438
  -552,537
  -586,804
  -620,307
  -653,161
  -685,520
  -717,567
  -749,503
  -781,543
  -813,908
  -846,821
  -880,501
  -915,167
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  64,781
  93,984
  131,810
  179,214
  236,747
  304,532
  382,250
  469,161
  564,169
  665,919
  772,391
  883,057
  995,910
  1,109,596
  1,222,959
  1,335,077
  1,445,282
  1,553,154
  1,658,508
  1,761,365
  1,861,927
  1,960,542
  2,057,672
  2,153,865
  2,249,726
  2,345,898
  2,443,046
  2,541,836
  2,642,932
  2,746,985
Discount rate, %
 
  11.00
  11.55
  12.13
  12.73
  13.37
  14.04
  14.74
  15.48
  16.25
  17.06
  17.92
  18.81
  19.75
  20.74
  21.78
  22.87
  24.01
  25.21
  26.47
  27.80
  29.19
  30.65
  32.18
  33.79
  35.48
  37.25
  39.11
  41.07
  43.12
  45.28
PV of cash for distribution, $m
 
  58,361
  75,529
  93,500
  110,957
  126,410
  138,455
  145,987
  148,363
  145,481
  137,773
  126,027
  111,581
  95,594
  79,276
  63,652
  49,485
  37,247
  27,138
  19,132
  13,046
  8,598
  5,474
  3,363
  1,992
  1,136
  624
  329
  166
  81
  37
Current shareholders' claim on cash, %
  100
  77.4
  60.4
  47.8
  38.4
  31.3
  25.9
  21.7
  18.5
  15.9
  13.8
  12.2
  10.8
  9.7
  8.8
  8.0
  7.3
  6.7
  6.2
  5.8
  5.4
  5.1
  4.8
  4.5
  4.3
  4.1
  3.9
  3.7
  3.6
  3.4
  3.3

Brookfield Asset Management Inc. is an alternative asset manager. The Company operates in eight segments. The Asset Management segment manages its listed partnerships, private funds and public markets on behalf of its clients. The Property segment includes the ownership, operation and development of office, retail and other properties. The Renewable power segment operates and develops hydroelectric, wind power and other generating facilities. The Infrastructure segment includes the ownership, operation and development of utilities and agricultural operations, among others. The Residential development segment includes homebuilding, condominium development and land development. The Service activities segment includes construction management and contracting services and property services. The Private equity segment includes the investments and operations overseen by its private equity group. The Corporate activities segment includes the allocation of capital to its operating platforms.

FINANCIAL RATIOS  of  Brookfield Asset Management Inc. Class A (BAM-A)

Valuation Ratios
P/E Ratio 21.9
Price to Sales 1.5
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 11.8
Price to Free Cash Flow 22.5
Growth Rates
Sales Growth Rate 22.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 32.2%
Cap. Spend. - 3 Yr. Gr. Rate -1.9%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 219.6%
Total Debt to Equity 253.5%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 3.8%
Return On Total Capital 1.8%
Ret/ On T. Cap. - 3 Yr. Avg. 3%
Return On Equity 6.4%
Return On Equity - 3 Yr. Avg. 10%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 48.8%
Gross Margin - 3 Yr. Avg. 49.2%
EBITDA Margin 33.1%
EBITDA Margin - 3 Yr. Avg. 46.2%
Operating Margin 12.3%
Oper. Margin - 3 Yr. Avg. 24.1%
Pre-Tax Margin 12.3%
Pre-Tax Margin - 3 Yr. Avg. 24.1%
Net Profit Margin 6.8%
Net Profit Margin - 3 Yr. Avg. 11.8%
Effective Tax Rate -11.5%
Eff/ Tax Rate - 3 Yr. Avg. 4.3%
Payout Ratio 38.3%

BAM-A stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BAM-A stock intrinsic value calculation we used $32981 million for the last fiscal year's total revenue generated by Brookfield Asset Management Inc. Class A. The default revenue input number comes from 2016 income statement of Brookfield Asset Management Inc. Class A. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our BAM-A stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 11%, whose default value for BAM-A is calculated based on our internal credit rating of Brookfield Asset Management Inc. Class A, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Brookfield Asset Management Inc. Class A.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of BAM-A stock the variable cost ratio is equal to 75.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for BAM-A stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.8% for Brookfield Asset Management Inc. Class A.

Corporate tax rate of 27% is the nominal tax rate for Brookfield Asset Management Inc. Class A. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the BAM-A stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for BAM-A are equal to 192.3%.

Life of production assets of 24.8 years is the average useful life of capital assets used in Brookfield Asset Management Inc. Class A operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for BAM-A is equal to 19.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $35740 million for Brookfield Asset Management Inc. Class A - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 989.218 million for Brookfield Asset Management Inc. Class A is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Brookfield Asset Management Inc. Class A at the current share price and the inputted number of shares is $50.5 billion.

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Financial statements of BAM-A
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