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

Previous Close

$50.85

  Intrinsic Value

$105.52

stock screener

  Rating & Target

str. buy

+108%

  Value-price divergence*

+354%

Previous close

$50.85

 
Intrinsic value

$105.52

 
Up/down potential

+108%

 
Rating

str. buy

 
Value-price divergence*

+354%

*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.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 50.0

 

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
  15.00
  14.00
  13.10
  12.29
  11.56
  10.90
  10.31
  9.78
  9.30
  8.87
  8.49
  8.14
  7.82
  7.54
  7.29
  7.06
  6.85
  6.67
  6.50
  6.35
  6.22
  6.09
  5.98
  5.89
  5.80
  5.72
  5.65
  5.58
  5.52
  5.47
Revenue, $m
  32,981
  37,928
  43,238
  48,902
  54,912
  61,261
  67,941
  74,949
  82,281
  89,937
  97,918
  106,229
  114,874
  123,862
  133,203
  142,910
  152,998
  163,483
  174,384
  185,721
  197,515
  209,793
  222,578
  235,898
  249,784
  264,266
  279,376
  295,150
  311,624
  328,836
  346,827
Variable operating expenses, $m
 
  28,597
  32,529
  36,723
  41,174
  45,875
  50,822
  56,011
  61,441
  67,110
  73,020
  78,663
  85,064
  91,720
  98,637
  105,826
  113,296
  121,060
  129,132
  137,527
  146,261
  155,352
  164,819
  174,684
  184,966
  195,690
  206,879
  218,560
  230,758
  243,504
  256,826
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
  28,597
  32,529
  36,723
  41,174
  45,875
  50,822
  56,011
  61,441
  67,110
  73,020
  78,663
  85,064
  91,720
  98,637
  105,826
  113,296
  121,060
  129,132
  137,527
  146,261
  155,352
  164,819
  174,684
  184,966
  195,690
  206,879
  218,560
  230,758
  243,504
  256,826
Operating income, $m
  4,044
  9,331
  10,709
  12,179
  13,738
  15,386
  17,119
  18,938
  20,841
  22,827
  24,898
  27,566
  29,809
  32,142
  34,566
  37,085
  39,703
  42,423
  45,252
  48,194
  51,255
  54,440
  57,758
  61,215
  64,818
  68,576
  72,497
  76,590
  80,865
  85,332
  90,000
EBITDA, $m
  6,773
  12,783
  14,573
  16,482
  18,508
  20,647
  22,899
  25,261
  27,732
  30,312
  33,002
  35,803
  38,717
  41,746
  44,894
  48,166
  51,566
  55,100
  58,774
  62,595
  66,570
  70,708
  75,017
  79,507
  84,187
  89,067
  94,160
  99,477
  105,029
  110,830
  116,893
Interest expense (income), $m
  4,137
  4,067
  5,321
  6,669
  8,106
  9,631
  11,242
  12,937
  14,716
  16,576
  18,519
  20,544
  22,653
  24,847
  27,128
  29,498
  31,961
  34,521
  37,182
  39,948
  42,825
  45,818
  48,933
  52,178
  55,558
  59,081
  62,756
  66,591
  70,593
  74,774
  79,141
Earnings before tax, $m
  4,044
  5,264
  5,388
  5,510
  5,632
  5,755
  5,877
  6,001
  6,125
  6,251
  6,379
  7,022
  7,156
  7,295
  7,438
  7,587
  7,741
  7,902
  8,070
  8,246
  8,430
  8,623
  8,825
  9,037
  9,260
  9,495
  9,741
  10,000
  10,272
  10,558
  10,859
Tax expense, $m
  -466
  1,421
  1,455
  1,488
  1,521
  1,554
  1,587
  1,620
  1,654
  1,688
  1,722
  1,896
  1,932
  1,970
  2,008
  2,048
  2,090
  2,134
  2,179
  2,226
  2,276
  2,328
  2,383
  2,440
  2,500
  2,564
  2,630
  2,700
  2,773
  2,851
  2,932
Net income, $m
  2,231
  3,843
  3,933
  4,022
  4,112
  4,201
  4,290
  4,380
  4,471
  4,563
  4,657
  5,126
  5,224
  5,325
  5,430
  5,538
  5,651
  5,769
  5,891
  6,020
  6,154
  6,295
  6,442
  6,597
  6,760
  6,931
  7,111
  7,300
  7,499
  7,707
  7,927

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
  241,581
  275,402
  311,479
  349,760
  390,196
  432,747
  477,382
  524,084
  572,848
  623,684
  676,615
  731,678
  788,927
  848,427
  910,257
  974,512
  1,041,295
  1,110,726
  1,182,934
  1,258,060
  1,336,258
  1,417,692
  1,502,538
  1,590,982
  1,683,221
  1,779,466
  1,879,937
  1,984,865
  2,094,496
  2,209,087
Adjusted assets (=assets-cash), $m
  210,130
  241,581
  275,402
  311,479
  349,760
  390,196
  432,747
  477,382
  524,084
  572,848
  623,684
  676,615
  731,678
  788,927
  848,427
  910,257
  974,512
  1,041,295
  1,110,726
  1,182,934
  1,258,060
  1,336,258
  1,417,692
  1,502,538
  1,590,982
  1,683,221
  1,779,466
  1,879,937
  1,984,865
  2,094,496
  2,209,087
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
  72,936
  83,147
  94,039
  105,596
  117,805
  130,651
  144,127
  158,227
  172,949
  188,297
  204,277
  220,902
  238,186
  256,149
  274,817
  294,216
  314,378
  335,340
  357,141
  379,822
  403,431
  428,017
  453,633
  480,335
  508,183
  537,240
  567,574
  599,253
  632,351
  666,948
Working capital, $m
  0
  7,206
  8,215
  9,291
  10,433
  11,640
  12,909
  14,240
  15,633
  17,088
  18,604
  20,183
  21,826
  23,534
  25,309
  27,153
  29,070
  31,062
  33,133
  35,287
  37,528
  39,861
  42,290
  44,821
  47,459
  50,210
  53,081
  56,079
  59,209
  62,479
  65,897
Total debt, $m
  90,545
  110,859
  138,931
  168,875
  200,648
  234,210
  269,527
  306,574
  345,337
  385,811
  428,005
  471,937
  517,640
  565,156
  614,541
  665,861
  719,192
  774,622
  832,249
  892,182
  954,537
  1,019,441
  1,087,031
  1,157,453
  1,230,862
  1,307,421
  1,387,304
  1,470,694
  1,557,785
  1,648,779
  1,743,889
Total liabilities, $m
  180,198
  200,512
  228,584
  258,528
  290,301
  323,863
  359,180
  396,227
  434,990
  475,464
  517,658
  561,590
  607,293
  654,809
  704,194
  755,514
  808,845
  864,275
  921,902
  981,835
  1,044,190
  1,109,094
  1,176,684
  1,247,106
  1,320,515
  1,397,074
  1,476,957
  1,560,347
  1,647,438
  1,738,432
  1,833,542
Total equity, $m
  35,740
  41,069
  46,818
  52,952
  59,459
  66,333
  73,567
  81,155
  89,094
  97,384
  106,026
  115,025
  124,385
  134,118
  144,233
  154,744
  165,667
  177,020
  188,823
  201,099
  213,870
  227,164
  241,008
  255,431
  270,467
  286,148
  302,509
  319,589
  337,427
  356,064
  375,545
Total liabilities and equity, $m
  215,938
  241,581
  275,402
  311,480
  349,760
  390,196
  432,747
  477,382
  524,084
  572,848
  623,684
  676,615
  731,678
  788,927
  848,427
  910,258
  974,512
  1,041,295
  1,110,725
  1,182,934
  1,258,060
  1,336,258
  1,417,692
  1,502,537
  1,590,982
  1,683,222
  1,779,466
  1,879,936
  1,984,865
  2,094,496
  2,209,087
Debt-to-equity ratio
  2.533
  2.700
  2.970
  3.190
  3.370
  3.530
  3.660
  3.780
  3.880
  3.960
  4.040
  4.100
  4.160
  4.210
  4.260
  4.300
  4.340
  4.380
  4.410
  4.440
  4.460
  4.490
  4.510
  4.530
  4.550
  4.570
  4.590
  4.600
  4.620
  4.630
  4.640
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
  3,843
  3,933
  4,022
  4,112
  4,201
  4,290
  4,380
  4,471
  4,563
  4,657
  5,126
  5,224
  5,325
  5,430
  5,538
  5,651
  5,769
  5,891
  6,020
  6,154
  6,295
  6,442
  6,597
  6,760
  6,931
  7,111
  7,300
  7,499
  7,707
  7,927
Depreciation, amort., depletion, $m
  2,729
  3,452
  3,864
  4,303
  4,769
  5,261
  5,779
  6,323
  6,891
  7,485
  8,104
  8,237
  8,907
  9,604
  10,329
  11,081
  11,864
  12,677
  13,522
  14,401
  15,315
  16,267
  17,259
  18,292
  19,368
  20,491
  21,663
  22,886
  24,163
  25,498
  26,893
Funds from operations, $m
  3,156
  7,295
  7,797
  8,325
  8,881
  9,462
  10,070
  10,703
  11,362
  12,048
  12,761
  13,363
  14,131
  14,930
  15,759
  16,620
  17,515
  18,445
  19,413
  20,420
  21,469
  22,562
  23,701
  24,889
  26,128
  27,422
  28,774
  30,186
  31,662
  33,206
  34,820
Change in working capital, $m
  -1,009
  940
  1,009
  1,076
  1,142
  1,206
  1,269
  1,331
  1,393
  1,455
  1,516
  1,579
  1,643
  1,708
  1,775
  1,844
  1,917
  1,992
  2,071
  2,154
  2,241
  2,333
  2,429
  2,531
  2,638
  2,752
  2,871
  2,997
  3,130
  3,270
  3,418
Cash from operations, $m
  4,165
  6,355
  6,788
  7,249
  7,739
  8,256
  8,800
  9,372
  9,969
  10,594
  11,244
  11,784
  12,489
  13,222
  13,984
  14,775
  15,598
  16,453
  17,342
  18,266
  19,228
  20,229
  21,272
  22,358
  23,490
  24,671
  25,903
  27,189
  28,532
  29,935
  31,402
Maintenance CAPEX, $m
  0
  -2,557
  -2,941
  -3,353
  -3,792
  -4,258
  -4,750
  -5,268
  -5,812
  -6,380
  -6,974
  -7,593
  -8,237
  -8,907
  -9,604
  -10,329
  -11,081
  -11,864
  -12,677
  -13,522
  -14,401
  -15,315
  -16,267
  -17,259
  -18,292
  -19,368
  -20,491
  -21,663
  -22,886
  -24,163
  -25,498
New CAPEX, $m
  -1,989
  -9,528
  -10,211
  -10,892
  -11,557
  -12,208
  -12,846
  -13,476
  -14,100
  -14,722
  -15,348
  -15,980
  -16,624
  -17,284
  -17,964
  -18,667
  -19,399
  -20,163
  -20,962
  -21,800
  -22,681
  -23,609
  -24,586
  -25,616
  -26,702
  -27,848
  -29,057
  -30,333
  -31,679
  -33,099
  -34,596
Cash from investing activities, $m
  -11,561
  -12,085
  -13,152
  -14,245
  -15,349
  -16,466
  -17,596
  -18,744
  -19,912
  -21,102
  -22,322
  -23,573
  -24,861
  -26,191
  -27,568
  -28,996
  -30,480
  -32,027
  -33,639
  -35,322
  -37,082
  -38,924
  -40,853
  -42,875
  -44,994
  -47,216
  -49,548
  -51,996
  -54,565
  -57,262
  -60,094
Free cash flow, $m
  -7,396
  -5,730
  -6,364
  -6,996
  -7,610
  -8,210
  -8,796
  -9,372
  -9,942
  -10,509
  -11,077
  -11,789
  -12,372
  -12,969
  -13,584
  -14,221
  -14,882
  -15,573
  -16,296
  -17,056
  -17,854
  -18,695
  -19,581
  -20,517
  -21,504
  -22,546
  -23,646
  -24,807
  -26,033
  -27,327
  -28,692
Issuance/(repayment) of debt, $m
  5,056
  26,122
  28,072
  29,944
  31,773
  33,562
  35,317
  37,047
  38,763
  40,474
  42,194
  43,932
  45,703
  47,516
  49,385
  51,319
  53,331
  55,430
  57,627
  59,932
  62,355
  64,904
  67,590
  70,422
  73,408
  76,559
  79,883
  83,391
  87,091
  90,994
  95,110
Issuance/(repurchase) of shares, $m
  119
  1,486
  1,817
  2,111
  2,396
  2,673
  2,943
  3,208
  3,468
  3,727
  3,985
  3,872
  4,137
  4,407
  4,685
  4,973
  5,272
  5,585
  5,912
  6,256
  6,618
  6,999
  7,402
  7,826
  8,275
  8,750
  9,251
  9,780
  10,339
  10,930
  11,553
Cash from financing (excl. dividends), $m  
  10,303
  27,608
  29,889
  32,055
  34,169
  36,235
  38,260
  40,255
  42,231
  44,201
  46,179
  47,804
  49,840
  51,923
  54,070
  56,292
  58,603
  61,015
  63,539
  66,188
  68,973
  71,903
  74,992
  78,248
  81,683
  85,309
  89,134
  93,171
  97,430
  101,924
  106,663
Total cash flow (excl. dividends), $m
  2,915
  21,878
  23,524
  25,060
  26,559
  28,025
  29,464
  30,882
  32,289
  33,692
  35,101
  36,016
  37,467
  38,954
  40,486
  42,072
  43,721
  45,442
  47,243
  49,132
  51,118
  53,209
  55,410
  57,732
  60,180
  62,763
  65,488
  68,363
  71,397
  74,597
  77,971
Retained Cash Flow (-), $m
  -1,548
  -5,329
  -5,750
  -6,133
  -6,508
  -6,874
  -7,234
  -7,588
  -7,939
  -8,290
  -8,642
  -8,998
  -9,361
  -9,732
  -10,115
  -10,511
  -10,923
  -11,353
  -11,803
  -12,275
  -12,771
  -13,294
  -13,844
  -14,424
  -15,035
  -15,681
  -16,362
  -17,080
  -17,838
  -18,637
  -19,480
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
 
  16,549
  17,775
  18,926
  20,051
  21,151
  22,230
  23,294
  24,349
  25,402
  26,459
  27,018
  28,106
  29,222
  30,371
  31,560
  32,797
  34,088
  35,440
  36,857
  38,347
  39,915
  41,567
  43,308
  45,145
  47,082
  49,127
  51,283
  53,559
  55,959
  58,491
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
 
  14,909
  14,284
  13,425
  12,414
  11,293
  10,107
  8,897
  7,700
  6,550
  5,474
  4,408
  3,551
  2,805
  2,170
  1,643
  1,216
  879
  619
  425
  284
  184
  116
  71
  42
  24
  13
  7
  4
  2
  1
Current shareholders' claim on cash, %
  100
  97.1
  94.1
  91.2
  88.3
  85.6
  83.0
  80.5
  78.1
  75.8
  73.7
  71.8
  70.0
  68.3
  66.6
  65.0
  63.4
  62.0
  60.5
  59.1
  57.8
  56.4
  55.2
  53.9
  52.7
  51.5
  50.3
  49.2
  48.1
  47.0
  45.9

Brookfield Asset Management Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm invests in the property, power, and infrastructure sectors. Its property business includes owning and managing office properties, developing master planned residential communities, and offering clients bridge and mezzanine lending, alternative assets funds, and financial and advisory services. Through its subsidiaries, the firm operates hydroelectric power facilities, interconnections and transmission facilities in Northeast North America, and development of wind power in Canada. Through its subsidiaries, it invests in specialty funds including private equity and makes direct investments in real estate, energy, and resource assets. The firm launches and manages equity and fixed income mutual funds. It also manages real estate and hedge funds. The firm invests in equity and fixed income markets across the globe. It was formerly known as Brascan Corp. Brookfield Asset Management is based in Toronto, Canada with additional offices in Bogota, Colombia, Botafogo, Brazil, Calgary, Canada, Dubai, United Arab Emirates, Gatineau, Canada, Hong Kong, Hong Kong, London, United Kingdom, Melbourne, Australia, Montreal, Canada, Mumbai, India, New York City, Perth, Australia, Shanghai, China, and Sydney, Australia.

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

Valuation Ratios
P/E Ratio 21.8
Price to Sales 1.5
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 11.7
Price to Free Cash Flow 22.4
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 219.5%
Total Debt to Equity 253.3%
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 15% 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%. 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 983.684 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 $50.0 billion.

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Stock chart of BAM-A Financial statements of BAM-A
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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