Intrinsic value of Ford Motor - F

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$11.04

  Intrinsic Value

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  Value-price divergence*

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$11.04

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

We calculate the intrinsic value of F 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 43.4

 

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, %
  1.50
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  151,800
  154,836
  158,397
  162,468
  167,038
  172,102
  177,659
  183,709
  190,259
  197,315
  204,887
  212,988
  221,632
  230,836
  240,618
  250,997
  261,997
  273,640
  285,953
  298,963
  312,700
  327,194
  342,480
  358,592
  375,568
  393,448
  412,273
  432,087
  452,938
  474,874
  497,947
Variable operating expenses, $m
 
  146,939
  150,319
  154,182
  158,519
  163,325
  168,598
  174,340
  180,555
  187,251
  194,438
  202,125
  210,328
  219,063
  228,345
  238,195
  248,634
  259,683
  271,368
  283,715
  296,751
  310,506
  325,012
  340,302
  356,413
  373,381
  391,245
  410,049
  429,836
  450,653
  472,549
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
  147,684
  146,939
  150,319
  154,182
  158,519
  163,325
  168,598
  174,340
  180,555
  187,251
  194,438
  202,125
  210,328
  219,063
  228,345
  238,195
  248,634
  259,683
  271,368
  283,715
  296,751
  310,506
  325,012
  340,302
  356,413
  373,381
  391,245
  410,049
  429,836
  450,653
  472,549
Operating income, $m
  4,116
  7,897
  8,078
  8,286
  8,519
  8,777
  9,061
  9,369
  9,703
  10,063
  10,449
  10,863
  11,304
  11,774
  12,272
  12,802
  13,363
  13,957
  14,585
  15,248
  15,949
  16,688
  17,468
  18,290
  19,155
  20,067
  21,028
  22,038
  23,102
  24,220
  25,397
EBITDA, $m
  13,139
  14,276
  14,605
  14,980
  15,402
  15,869
  16,381
  16,939
  17,543
  18,193
  18,891
  19,638
  20,435
  21,284
  22,186
  23,143
  24,157
  25,231
  26,366
  27,566
  28,832
  30,169
  31,578
  33,064
  34,629
  36,277
  38,013
  39,840
  41,763
  43,785
  45,913
Interest expense (income), $m
  0
  3,645
  3,770
  3,910
  4,070
  4,249
  4,447
  4,665
  4,903
  5,160
  5,436
  5,733
  6,051
  6,390
  6,751
  7,135
  7,542
  7,974
  8,430
  8,913
  9,424
  9,962
  10,531
  11,131
  11,763
  12,429
  13,130
  13,868
  14,646
  15,463
  16,324
Earnings before tax, $m
  6,796
  4,252
  4,308
  4,376
  4,449
  4,528
  4,613
  4,704
  4,801
  4,904
  5,013
  5,130
  5,253
  5,383
  5,521
  5,667
  5,821
  5,983
  6,154
  6,335
  6,525
  6,726
  6,937
  7,159
  7,393
  7,639
  7,898
  8,170
  8,456
  8,757
  9,073
Tax expense, $m
  2,189
  1,148
  1,163
  1,182
  1,201
  1,223
  1,246
  1,270
  1,296
  1,324
  1,354
  1,385
  1,418
  1,453
  1,491
  1,530
  1,572
  1,615
  1,662
  1,710
  1,762
  1,816
  1,873
  1,933
  1,996
  2,062
  2,132
  2,206
  2,283
  2,364
  2,450
Net income, $m
  4,596
  3,104
  3,145
  3,195
  3,248
  3,306
  3,368
  3,434
  3,504
  3,580
  3,660
  3,745
  3,835
  3,930
  4,030
  4,137
  4,249
  4,368
  4,493
  4,625
  4,763
  4,910
  5,064
  5,226
  5,397
  5,576
  5,765
  5,964
  6,173
  6,393
  6,624

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  38,827
  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
  237,951
  203,197
  207,870
  213,213
  219,210
  225,856
  233,148
  241,088
  249,683
  258,943
  268,881
  279,512
  290,856
  302,935
  315,771
  329,393
  343,828
  359,108
  375,267
  392,340
  410,367
  429,389
  449,449
  470,593
  492,872
  516,336
  541,041
  567,044
  594,407
  623,194
  653,473
Adjusted assets (=assets-cash), $m
  199,124
  203,197
  207,870
  213,213
  219,210
  225,856
  233,148
  241,088
  249,683
  258,943
  268,881
  279,512
  290,856
  302,935
  315,771
  329,393
  343,828
  359,108
  375,267
  392,340
  410,367
  429,389
  449,449
  470,593
  492,872
  516,336
  541,041
  567,044
  594,407
  623,194
  653,473
Revenue / Adjusted assets
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
  0.762
Average production assets, $m
  31,242
  31,896
  32,630
  33,468
  34,410
  35,453
  36,598
  37,844
  39,193
  40,647
  42,207
  43,876
  45,656
  47,552
  49,567
  51,705
  53,971
  56,370
  58,906
  61,586
  64,416
  67,402
  70,551
  73,870
  77,367
  81,050
  84,928
  89,010
  93,305
  97,824
  102,577
Working capital, $m
  18,180
  29,574
  30,254
  31,031
  31,904
  32,872
  33,933
  35,088
  36,339
  37,687
  39,133
  40,681
  42,332
  44,090
  45,958
  47,940
  50,041
  52,265
  54,617
  57,102
  59,726
  62,494
  65,414
  68,491
  71,734
  75,149
  78,744
  82,529
  86,511
  90,701
  95,108
Total debt, $m
  142,970
  107,719
  111,710
  116,273
  121,395
  127,070
  133,297
  140,078
  147,419
  155,326
  163,813
  172,892
  182,580
  192,895
  203,858
  215,490
  227,818
  240,867
  254,667
  269,247
  284,643
  300,887
  318,018
  336,076
  355,101
  375,140
  396,238
  418,445
  441,813
  466,397
  492,255
Total liabilities, $m
  208,781
  173,530
  177,521
  182,084
  187,206
  192,881
  199,108
  205,889
  213,230
  221,137
  229,624
  238,703
  248,391
  258,706
  269,669
  281,301
  293,629
  306,678
  320,478
  335,058
  350,454
  366,698
  383,829
  401,887
  420,912
  440,951
  462,049
  484,256
  507,624
  532,208
  558,066
Total equity, $m
  29,170
  29,667
  30,349
  31,129
  32,005
  32,975
  34,040
  35,199
  36,454
  37,806
  39,257
  40,809
  42,465
  44,228
  46,103
  48,091
  50,199
  52,430
  54,789
  57,282
  59,914
  62,691
  65,620
  68,707
  71,959
  75,385
  78,992
  82,788
  86,783
  90,986
  95,407
Total liabilities and equity, $m
  237,951
  203,197
  207,870
  213,213
  219,211
  225,856
  233,148
  241,088
  249,684
  258,943
  268,881
  279,512
  290,856
  302,934
  315,772
  329,392
  343,828
  359,108
  375,267
  392,340
  410,368
  429,389
  449,449
  470,594
  492,871
  516,336
  541,041
  567,044
  594,407
  623,194
  653,473
Debt-to-equity ratio
  4.901
  3.630
  3.680
  3.740
  3.790
  3.850
  3.920
  3.980
  4.040
  4.110
  4.170
  4.240
  4.300
  4.360
  4.420
  4.480
  4.540
  4.590
  4.650
  4.700
  4.750
  4.800
  4.850
  4.890
  4.930
  4.980
  5.020
  5.050
  5.090
  5.130
  5.160
Adjusted equity ratio
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146
  0.146

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,596
  3,104
  3,145
  3,195
  3,248
  3,306
  3,368
  3,434
  3,504
  3,580
  3,660
  3,745
  3,835
  3,930
  4,030
  4,137
  4,249
  4,368
  4,493
  4,625
  4,763
  4,910
  5,064
  5,226
  5,397
  5,576
  5,765
  5,964
  6,173
  6,393
  6,624
Depreciation, amort., depletion, $m
  9,023
  6,380
  6,527
  6,694
  6,883
  7,091
  7,320
  7,569
  7,839
  8,130
  8,442
  8,775
  9,131
  9,510
  9,913
  10,341
  10,794
  11,274
  11,781
  12,317
  12,883
  13,480
  14,110
  14,774
  15,473
  16,210
  16,986
  17,802
  18,661
  19,565
  20,515
Funds from operations, $m
  22,716
  9,484
  9,671
  9,889
  10,131
  10,397
  10,688
  11,003
  11,344
  11,710
  12,101
  12,520
  12,966
  13,440
  13,944
  14,478
  15,043
  15,642
  16,274
  16,942
  17,647
  18,390
  19,174
  20,000
  20,870
  21,786
  22,751
  23,766
  24,834
  25,957
  27,139
Change in working capital, $m
  2,924
  580
  680
  778
  873
  967
  1,061
  1,156
  1,251
  1,348
  1,446
  1,547
  1,651
  1,758
  1,868
  1,982
  2,101
  2,224
  2,352
  2,485
  2,624
  2,768
  2,920
  3,077
  3,242
  3,415
  3,596
  3,785
  3,982
  4,190
  4,407
Cash from operations, $m
  19,792
  9,858
  8,991
  9,111
  9,258
  9,430
  9,627
  9,848
  10,093
  10,362
  10,655
  10,973
  11,315
  11,682
  12,076
  12,495
  12,942
  13,418
  13,922
  14,457
  15,023
  15,622
  16,254
  16,923
  17,628
  18,371
  19,155
  19,981
  20,852
  21,768
  22,732
Maintenance CAPEX, $m
  0
  -6,248
  -6,379
  -6,526
  -6,694
  -6,882
  -7,091
  -7,320
  -7,569
  -7,839
  -8,129
  -8,441
  -8,775
  -9,131
  -9,510
  -9,913
  -10,341
  -10,794
  -11,274
  -11,781
  -12,317
  -12,883
  -13,480
  -14,110
  -14,774
  -15,473
  -16,210
  -16,986
  -17,802
  -18,661
  -19,565
New CAPEX, $m
  -6,992
  -655
  -734
  -839
  -941
  -1,043
  -1,145
  -1,246
  -1,349
  -1,454
  -1,560
  -1,669
  -1,781
  -1,896
  -2,015
  -2,138
  -2,266
  -2,399
  -2,536
  -2,680
  -2,830
  -2,986
  -3,149
  -3,319
  -3,497
  -3,683
  -3,878
  -4,082
  -4,295
  -4,519
  -4,753
Cash from investing activities, $m
  -25,352
  -6,903
  -7,113
  -7,365
  -7,635
  -7,925
  -8,236
  -8,566
  -8,918
  -9,293
  -9,689
  -10,110
  -10,556
  -11,027
  -11,525
  -12,051
  -12,607
  -13,193
  -13,810
  -14,461
  -15,147
  -15,869
  -16,629
  -17,429
  -18,271
  -19,156
  -20,088
  -21,068
  -22,097
  -23,180
  -24,318
Free cash flow, $m
  -5,560
  2,955
  1,878
  1,747
  1,623
  1,505
  1,391
  1,282
  1,175
  1,070
  966
  862
  759
  655
  550
  444
  335
  225
  112
  -4
  -124
  -247
  -375
  -507
  -643
  -785
  -933
  -1,086
  -1,246
  -1,412
  -1,586
Issuance/(repayment) of debt, $m
  11,028
  3,576
  3,991
  4,562
  5,122
  5,676
  6,227
  6,781
  7,340
  7,908
  8,487
  9,079
  9,688
  10,315
  10,963
  11,633
  12,328
  13,049
  13,800
  14,581
  15,395
  16,244
  17,131
  18,058
  19,026
  20,038
  21,098
  22,207
  23,368
  24,584
  25,858
Issuance/(repurchase) of shares, $m
  -145
  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 from financing (excl. dividends), $m  
  10,834
  3,576
  3,991
  4,562
  5,122
  5,676
  6,227
  6,781
  7,340
  7,908
  8,487
  9,079
  9,688
  10,315
  10,963
  11,633
  12,328
  13,049
  13,800
  14,581
  15,395
  16,244
  17,131
  18,058
  19,026
  20,038
  21,098
  22,207
  23,368
  24,584
  25,858
Total cash flow (excl. dividends), $m
  5,009
  6,531
  5,870
  6,309
  6,745
  7,180
  7,619
  8,063
  8,515
  8,978
  9,453
  9,942
  10,447
  10,970
  11,513
  12,076
  12,663
  13,274
  13,911
  14,576
  15,271
  15,997
  16,756
  17,551
  18,382
  19,253
  20,165
  21,121
  22,122
  23,172
  24,273
Retained Cash Flow (-), $m
  -528
  -497
  -682
  -780
  -876
  -970
  -1,065
  -1,159
  -1,255
  -1,352
  -1,451
  -1,552
  -1,656
  -1,763
  -1,874
  -1,989
  -2,108
  -2,231
  -2,359
  -2,493
  -2,632
  -2,777
  -2,929
  -3,087
  -3,253
  -3,426
  -3,607
  -3,796
  -3,995
  -4,203
  -4,421
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
 
  6,035
  5,187
  5,529
  5,869
  6,210
  6,554
  6,903
  7,260
  7,626
  8,002
  8,389
  8,791
  9,207
  9,639
  10,088
  10,556
  11,043
  11,552
  12,084
  12,639
  13,220
  13,828
  14,464
  15,130
  15,827
  16,558
  17,324
  18,127
  18,969
  19,852
Discount rate, %
 
  9.30
  9.77
  10.25
  10.77
  11.30
  11.87
  12.46
  13.09
  13.74
  14.43
  15.15
  15.91
  16.70
  17.54
  18.41
  19.33
  20.30
  21.32
  22.38
  23.50
  24.68
  25.91
  27.20
  28.57
  29.99
  31.49
  33.07
  34.72
  36.46
  38.28
PV of cash for distribution, $m
 
  5,521
  4,305
  4,125
  3,899
  3,635
  3,344
  3,034
  2,714
  2,394
  2,079
  1,778
  1,495
  1,236
  1,004
  799
  624
  477
  357
  260
  185
  129
  87
  57
  36
  22
  13
  8
  4
  2
  1
Current shareholders' claim on cash, %
  100
  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
  100.0

Ford Motor Company, together with its subsidiaries, designs, manufactures, markets, and services automobiles in North America, South America, Europe, the Middle East and Africa, and the Asia Pacific. The company’s Automotive segment develops, manufactures, distributes, and services cars, trucks, SUVs, and electrified vehicles under the Ford name; and luxury vehicles under the Lincoln name, as well as service parts and accessories. This segment markets its products through distributors and dealers, as well as through dealerships to fleet customers, including commercial fleet customers, daily rental car companies, and governments. Its Financial Services segment offers various automotive financing products to and through automotive dealers. Its financing products comprise retail installment sale contracts for new and used vehicles; and direct financing leases for new vehicles to retail and commercial customers, such as leasing companies, government entities, daily rental car companies, and fleet customers. This segment also offers wholesale loans to dealers to finance the purchase of vehicle inventory; and loans to dealers to finance working capital and improvement of dealership facilities, purchase dealership real estate, and other dealer vehicle programs. The company was founded in 1903 and is based in Dearborn, Michigan.

FINANCIAL RATIOS  of  Ford Motor (F)

Valuation Ratios
P/E Ratio 9.7
Price to Sales 0.3
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 2.3
Price to Free Cash Flow 3.5
Growth Rates
Sales Growth Rate 1.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -2.8%
Cap. Spend. - 3 Yr. Gr. Rate 1.2%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 319.9%
Total Debt to Equity 490.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 2%
Ret/ On Assets - 3 Yr. Avg. 2%
Return On Total Capital 2.8%
Ret/ On T. Cap. - 3 Yr. Avg. 2.8%
Return On Equity 15.9%
Return On Equity - 3 Yr. Avg. 16.2%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 15.6%
Gross Margin - 3 Yr. Avg. 14.1%
EBITDA Margin 10.4%
EBITDA Margin - 3 Yr. Avg. 9.5%
Operating Margin 2.7%
Oper. Margin - 3 Yr. Avg. 2.7%
Pre-Tax Margin 4.5%
Pre-Tax Margin - 3 Yr. Avg. 4.1%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 2.9%
Effective Tax Rate 32.2%
Eff/ Tax Rate - 3 Yr. Avg. 20.2%
Payout Ratio 73.5%

F stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the F stock intrinsic value calculation we used $151800 million for the last fiscal year's total revenue generated by Ford Motor. The default revenue input number comes from 2016 income statement of Ford Motor. 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 F stock valuation model: a) initial revenue growth rate of 2% 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 9.3%, whose default value for F is calculated based on our internal credit rating of Ford Motor, 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 Ford Motor.
    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 F stock the variable cost ratio is equal to 94.9%.

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 F 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 Ford Motor.

Corporate tax rate of 27% is the nominal tax rate for Ford Motor. 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 F 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 F are equal to 20.6%.

Life of production assets of 3.5 years is the average useful life of capital assets used in Ford Motor 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 F 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 - $29170 million for Ford Motor - 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 3933.81 million for Ford Motor 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 Ford Motor at the current share price and the inputted number of shares is $43.4 billion.


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Stock chart of F Financial statements of F Annual reports of F
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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