Intrinsic value of Power Corporation of Canada Subordinate - POW

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$28.90

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$28.90

 
Intrinsic value

$99.58

 
Up/down potential

+245%

 
Rating

str. buy

 
Value-price divergence* premium content

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

We calculate the intrinsic value of POW 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 12.0

 

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, %
  32.63
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
  4.92
  4.93
  4.94
Revenue, $m
  0
  52,628
  54,643
  56,800
  59,102
  61,553
  64,158
  66,923
  69,853
  72,954
  76,235
  79,701
  83,361
  87,223
  91,296
  95,589
  100,113
  104,877
  109,893
  115,174
  120,730
  126,576
  132,725
  139,191
  145,990
  153,138
  160,652
  168,550
  176,850
  185,572
  194,737
Variable operating expenses, $m
 
  45,646
  47,358
  49,189
  51,144
  53,226
  55,438
  57,786
  60,275
  62,909
  65,695
  67,689
  70,797
  74,077
  77,536
  81,182
  85,024
  89,070
  93,331
  97,815
  102,534
  107,499
  112,721
  118,212
  123,987
  130,058
  136,439
  143,146
  150,196
  157,603
  165,387
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
  46,288
  45,646
  47,358
  49,189
  51,144
  53,226
  55,438
  57,786
  60,275
  62,909
  65,695
  67,689
  70,797
  74,077
  77,536
  81,182
  85,024
  89,070
  93,331
  97,815
  102,534
  107,499
  112,721
  118,212
  123,987
  130,058
  136,439
  143,146
  150,196
  157,603
  165,387
Operating income, $m
  4,462
  6,982
  7,286
  7,611
  7,958
  8,327
  8,720
  9,136
  9,578
  10,046
  10,540
  12,012
  12,564
  13,146
  13,760
  14,407
  15,089
  15,807
  16,563
  17,359
  18,196
  19,077
  20,004
  20,978
  22,003
  23,081
  24,213
  25,403
  26,654
  27,969
  29,350
EBITDA, $m
  4,462
  8,753
  9,088
  9,447
  9,830
  10,237
  10,671
  11,130
  11,618
  12,134
  12,679
  13,256
  13,864
  14,507
  15,184
  15,898
  16,650
  17,443
  18,277
  19,155
  20,080
  21,052
  22,074
  23,150
  24,281
  25,470
  26,719
  28,033
  29,413
  30,864
  32,388
Interest expense (income), $m
  576
  586
  85
  614
  1,180
  1,784
  2,427
  3,111
  3,837
  4,606
  5,420
  6,281
  7,191
  8,152
  9,166
  10,235
  11,362
  12,549
  13,800
  15,117
  16,503
  17,961
  19,496
  21,110
  22,807
  24,592
  26,469
  28,441
  30,514
  32,693
  34,982
Earnings before tax, $m
  3,850
  6,396
  7,201
  6,997
  6,778
  6,543
  6,292
  6,025
  5,741
  5,439
  5,120
  5,731
  5,373
  4,994
  4,594
  4,172
  3,727
  3,257
  2,763
  2,242
  1,693
  1,116
  508
  -132
  -804
  -1,512
  -2,256
  -3,038
  -3,860
  -4,724
  -5,632
Tax expense, $m
  587
  1,727
  1,944
  1,889
  1,830
  1,767
  1,699
  1,627
  1,550
  1,469
  1,382
  1,547
  1,451
  1,348
  1,240
  1,126
  1,006
  880
  746
  605
  457
  301
  137
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  1,134
  4,669
  5,257
  5,108
  4,948
  4,777
  4,593
  4,398
  4,191
  3,971
  3,737
  4,184
  3,922
  3,646
  3,354
  3,046
  2,721
  2,378
  2,017
  1,637
  1,236
  814
  371
  -132
  -804
  -1,512
  -2,256
  -3,038
  -3,860
  -4,724
  -5,632

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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
  0
Total assets, $m
  422,903
  438,565
  455,362
  473,335
  492,516
  512,941
  534,650
  557,689
  582,106
  607,953
  635,289
  664,174
  694,673
  726,856
  760,797
  796,575
  834,271
  873,975
  915,779
  959,781
  1,006,085
  1,054,799
  1,106,038
  1,159,924
  1,216,584
  1,276,152
  1,338,768
  1,404,582
  1,473,750
  1,546,434
  1,622,809
Adjusted assets (=assets-cash), $m
  422,903
  438,565
  455,362
  473,335
  492,516
  512,941
  534,650
  557,689
  582,106
  607,953
  635,289
  664,174
  694,673
  726,856
  760,797
  796,575
  834,271
  873,975
  915,779
  959,781
  1,006,085
  1,054,799
  1,106,038
  1,159,924
  1,216,584
  1,276,152
  1,338,768
  1,404,582
  1,473,750
  1,546,434
  1,622,809
Revenue / Adjusted assets
  0.000
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
  0.120
Average production assets, $m
  7,928
  8,210
  8,524
  8,861
  9,220
  9,602
  10,009
  10,440
  10,897
  11,381
  11,893
  12,433
  13,004
  13,607
  14,242
  14,912
  15,618
  16,361
  17,143
  17,967
  18,834
  19,746
  20,705
  21,714
  22,774
  23,890
  25,062
  26,294
  27,589
  28,949
  30,379
Working capital, $m
  0
  474
  492
  511
  532
  554
  577
  602
  629
  657
  686
  717
  750
  785
  822
  860
  901
  944
  989
  1,037
  1,087
  1,139
  1,195
  1,253
  1,314
  1,378
  1,446
  1,517
  1,592
  1,670
  1,753
Total debt, $m
  16,747
  2,416
  17,533
  33,709
  50,972
  69,355
  88,893
  109,628
  131,603
  154,866
  179,468
  205,465
  232,914
  261,879
  292,426
  324,625
  358,552
  394,286
  431,909
  471,511
  513,184
  557,027
  603,142
  651,640
  702,634
  756,245
  812,599
  871,832
  934,083
  999,499
  1,068,236
Total liabilities, $m
  409,039
  394,708
  409,825
  426,001
  443,264
  461,647
  481,185
  501,920
  523,895
  547,158
  571,760
  597,757
  625,206
  654,171
  684,718
  716,917
  750,844
  786,578
  824,201
  863,803
  905,476
  949,319
  995,434
  1,043,932
  1,094,926
  1,148,537
  1,204,891
  1,264,124
  1,326,375
  1,391,791
  1,460,528
Total equity, $m
  13,864
  43,856
  45,536
  47,333
  49,252
  51,294
  53,465
  55,769
  58,211
  60,795
  63,529
  66,417
  69,467
  72,686
  76,080
  79,657
  83,427
  87,398
  91,578
  95,978
  100,608
  105,480
  110,604
  115,992
  121,658
  127,615
  133,877
  140,458
  147,375
  154,643
  162,281
Total liabilities and equity, $m
  422,903
  438,564
  455,361
  473,334
  492,516
  512,941
  534,650
  557,689
  582,106
  607,953
  635,289
  664,174
  694,673
  726,857
  760,798
  796,574
  834,271
  873,976
  915,779
  959,781
  1,006,084
  1,054,799
  1,106,038
  1,159,924
  1,216,584
  1,276,152
  1,338,768
  1,404,582
  1,473,750
  1,546,434
  1,622,809
Debt-to-equity ratio
  1.208
  0.060
  0.390
  0.710
  1.030
  1.350
  1.660
  1.970
  2.260
  2.550
  2.820
  3.090
  3.350
  3.600
  3.840
  4.080
  4.300
  4.510
  4.720
  4.910
  5.100
  5.280
  5.450
  5.620
  5.780
  5.930
  6.070
  6.210
  6.340
  6.460
  6.580
Adjusted equity ratio
  0.033
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,134
  4,669
  5,257
  5,108
  4,948
  4,777
  4,593
  4,398
  4,191
  3,971
  3,737
  4,184
  3,922
  3,646
  3,354
  3,046
  2,721
  2,378
  2,017
  1,637
  1,236
  814
  371
  -132
  -804
  -1,512
  -2,256
  -3,038
  -3,860
  -4,724
  -5,632
Depreciation, amort., depletion, $m
  0
  1,771
  1,802
  1,836
  1,872
  1,910
  1,951
  1,994
  2,040
  2,088
  2,139
  1,243
  1,300
  1,361
  1,424
  1,491
  1,562
  1,636
  1,714
  1,797
  1,883
  1,975
  2,071
  2,171
  2,277
  2,389
  2,506
  2,629
  2,759
  2,895
  3,038
Funds from operations, $m
  6,299
  6,440
  7,059
  6,944
  6,820
  6,687
  6,544
  6,392
  6,231
  6,059
  5,877
  5,427
  5,222
  5,006
  4,778
  4,537
  4,282
  4,014
  3,731
  3,433
  3,119
  2,789
  2,441
  2,040
  1,473
  877
  251
  -408
  -1,101
  -1,829
  -2,594
Change in working capital, $m
  -443
  17
  18
  19
  21
  22
  23
  25
  26
  28
  30
  31
  33
  35
  37
  39
  41
  43
  45
  48
  50
  53
  55
  58
  61
  64
  68
  71
  75
  78
  82
Cash from operations, $m
  6,742
  6,420
  7,041
  6,925
  6,799
  6,665
  6,521
  6,367
  6,204
  6,031
  5,847
  5,396
  5,190
  4,972
  4,741
  4,498
  4,242
  3,971
  3,686
  3,386
  3,069
  2,736
  2,386
  1,982
  1,412
  813
  183
  -479
  -1,176
  -1,908
  -2,677
Maintenance CAPEX, $m
  0
  -793
  -821
  -852
  -886
  -922
  -960
  -1,001
  -1,044
  -1,090
  -1,138
  -1,189
  -1,243
  -1,300
  -1,361
  -1,424
  -1,491
  -1,562
  -1,636
  -1,714
  -1,797
  -1,883
  -1,975
  -2,071
  -2,171
  -2,277
  -2,389
  -2,506
  -2,629
  -2,759
  -2,895
New CAPEX, $m
  0
  -282
  -314
  -336
  -359
  -382
  -406
  -431
  -457
  -484
  -512
  -541
  -571
  -602
  -635
  -670
  -706
  -743
  -783
  -824
  -867
  -912
  -959
  -1,009
  -1,061
  -1,115
  -1,172
  -1,232
  -1,295
  -1,361
  -1,430
Cash from investing activities, $m
  -5,484
  -1,075
  -1,135
  -1,188
  -1,245
  -1,304
  -1,366
  -1,432
  -1,501
  -1,574
  -1,650
  -1,730
  -1,814
  -1,902
  -1,996
  -2,094
  -2,197
  -2,305
  -2,419
  -2,538
  -2,664
  -2,795
  -2,934
  -3,080
  -3,232
  -3,392
  -3,561
  -3,738
  -3,924
  -4,120
  -4,325
Free cash flow, $m
  1,258
  5,345
  5,906
  5,736
  5,554
  5,360
  5,154
  4,935
  4,703
  4,457
  4,197
  3,666
  3,375
  3,069
  2,745
  2,404
  2,045
  1,666
  1,267
  848
  406
  -59
  -548
  -1,098
  -1,820
  -2,580
  -3,378
  -4,218
  -5,100
  -6,027
  -7,001
Issuance/(repayment) of debt, $m
  1,417
  -14,331
  15,117
  16,176
  17,263
  18,382
  19,539
  20,735
  21,975
  23,263
  24,602
  25,996
  27,449
  28,965
  30,547
  32,200
  33,927
  35,733
  37,624
  39,602
  41,673
  43,843
  46,116
  48,497
  50,994
  53,611
  56,355
  59,233
  62,251
  65,416
  68,737
Issuance/(repurchase) of shares, $m
  -369
  38,978
  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 from financing (excl. dividends), $m  
  -298
  24,647
  15,117
  16,176
  17,263
  18,382
  19,539
  20,735
  21,975
  23,263
  24,602
  25,996
  27,449
  28,965
  30,547
  32,200
  33,927
  35,733
  37,624
  39,602
  41,673
  43,843
  46,116
  48,497
  50,994
  53,611
  56,355
  59,233
  62,251
  65,416
  68,737
Total cash flow (excl. dividends), $m
  759
  -8,986
  21,023
  21,911
  22,817
  23,743
  24,693
  25,670
  26,678
  27,720
  28,799
  29,662
  30,825
  32,033
  33,292
  34,604
  35,972
  37,400
  38,891
  40,450
  42,079
  43,784
  45,568
  47,400
  49,174
  51,031
  52,977
  55,015
  57,151
  59,389
  61,736
Retained Cash Flow (-), $m
  114
  -29,992
  -1,680
  -1,797
  -1,918
  -2,042
  -2,171
  -2,304
  -2,442
  -2,585
  -2,734
  -2,888
  -3,050
  -3,218
  -3,394
  -3,578
  -3,770
  -3,970
  -4,180
  -4,400
  -4,630
  -4,871
  -5,124
  -5,389
  -5,666
  -5,957
  -6,262
  -6,581
  -6,917
  -7,268
  -7,637
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
 
  0
  19,343
  20,114
  20,899
  21,700
  22,522
  23,366
  24,237
  25,136
  26,066
  26,774
  27,775
  28,815
  29,898
  31,026
  32,202
  33,429
  34,711
  36,049
  37,449
  38,912
  40,444
  42,011
  43,508
  45,075
  46,715
  48,434
  50,234
  52,121
  54,098
Discount rate, %
 
  6.60
  6.93
  7.28
  7.64
  8.02
  8.42
  8.84
  9.29
  9.75
  10.24
  10.75
  11.29
  11.85
  12.45
  13.07
  13.72
  14.41
  15.13
  15.88
  16.68
  17.51
  18.39
  19.31
  20.27
  21.29
  22.35
  23.47
  24.64
  25.87
  27.17
PV of cash for distribution, $m
 
  0
  16,917
  16,292
  15,568
  14,754
  13,863
  12,910
  11,910
  10,879
  9,834
  8,708
  7,696
  6,718
  5,787
  4,916
  4,116
  3,392
  2,749
  2,190
  1,713
  1,313
  987
  725
  518
  362
  246
  163
  105
  66
  40
Current shareholders' claim on cash, %
  100
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5
  23.5

Power Corporation of Canada operates as a diversified international management and holding company with interests primarily in the financial services, communications, and other business sectors in Canada, the United States, Europe, and Asia. The company offers life insurance, health insurance, and retirement and investment management services; annuities, executive benefits, and mortgage products; and wealth management services, as well as manages and distributes mutual funds and other managed asset products. It also engages in the asset management and reinsurance businesses; and owns La Presse, the French-language news medium. In addition, the company operates as a rooftop solar power producer; and owns and operates hydropower facilities, as well as provides equity investment funds. Further, the company holds interests in various sectors, such as specialty minerals, cement, aggregates, concrete, oil, natural gas, wines and spirits, electricity, and energy and environmental services, as well as testing, inspection, and certification. Power Corporation of Canada was founded in 1925 and is headquartered in Montréal, Canada.

FINANCIAL RATIOS  of  Power Corporation of Canada Subordinate (POW)

Valuation Ratios
P/E Ratio 10.6
Price to Sales 0.2
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 1.8
Price to Free Cash Flow 1.8
Growth Rates
Sales Growth Rate 32.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 117.6%
Total Debt to Equity 120.8%
Interest Coverage 8
Management Effectiveness
Return On Assets 0.4%
Ret/ On Assets - 3 Yr. Avg. 0.5%
Return On Total Capital 3.8%
Ret/ On T. Cap. - 3 Yr. Avg. 5.1%
Return On Equity 8.1%
Return On Equity - 3 Yr. Avg. 11.3%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 8.7%
EBITDA Margin - 3 Yr. Avg. 11.4%
Operating Margin 8.8%
Oper. Margin - 3 Yr. Avg. 10.9%
Pre-Tax Margin 7.6%
Pre-Tax Margin - 3 Yr. Avg. 10%
Net Profit Margin 2.2%
Net Profit Margin - 3 Yr. Avg. 3.4%
Effective Tax Rate 15.2%
Eff/ Tax Rate - 3 Yr. Avg. 16.3%
Payout Ratio 58.4%

POW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the POW stock intrinsic value calculation we used $50750 million for the last fiscal year's total revenue generated by Power Corporation of Canada Subordinate . The default revenue input number comes from 2016 income statement of Power Corporation of Canada Subordinate . 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 POW stock valuation model: a) initial revenue growth rate of 3.7% 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 6.6%, whose default value for POW is calculated based on our internal credit rating of Power Corporation of Canada Subordinate , 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 Power Corporation of Canada Subordinate .
    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 POW stock the variable cost ratio is equal to 86.8%.

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 POW 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 3.5% for Power Corporation of Canada Subordinate .

Corporate tax rate of 27% is the nominal tax rate for Power Corporation of Canada Subordinate . 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 POW 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 POW are equal to 15.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Power Corporation of Canada Subordinate 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 POW is equal to 0.9%. 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 - $13864 million for Power Corporation of Canada Subordinate - 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 413.518 million for Power Corporation of Canada Subordinate 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 Power Corporation of Canada Subordinate at the current share price and the inputted number of shares is $12.0 billion.


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