Intrinsic value of Ford Motor - F

Previous Close

$10.56

  Intrinsic Value

$14.53

stock screener

  Rating & Target

buy

+38%

  Value-price divergence*

-62%

Previous close

$10.56

 
Intrinsic value

$14.53

 
Up/down potential

+38%

 
Rating

buy

 
Value-price divergence*

-62%

*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 41.5

 

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
  3.80
  3.92
  4.03
  4.13
  4.21
  4.29
  4.36
  4.43
  4.48
  4.54
  4.58
  4.62
  4.66
  4.69
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
Revenue, $m
  151,800
  157,568
  163,745
  170,341
  177,368
  184,840
  192,772
  201,181
  210,085
  219,504
  229,459
  239,972
  251,067
  262,769
  275,106
  288,106
  301,800
  316,219
  331,397
  347,370
  364,175
  381,853
  400,444
  419,993
  440,546
  462,152
  484,861
  508,728
  533,810
  560,165
  587,856
Variable operating expenses, $m
 
  149,532
  155,394
  161,653
  168,322
  175,413
  182,940
  190,921
  199,371
  208,309
  217,756
  227,733
  238,262
  249,367
  261,075
  273,412
  286,407
  300,090
  314,494
  329,653
  345,601
  362,377
  380,020
  398,572
  418,076
  438,580
  460,131
  482,781
  506,583
  531,594
  557,873
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
  149,532
  155,394
  161,653
  168,322
  175,413
  182,940
  190,921
  199,371
  208,309
  217,756
  227,733
  238,262
  249,367
  261,075
  273,412
  286,407
  300,090
  314,494
  329,653
  345,601
  362,377
  380,020
  398,572
  418,076
  438,580
  460,131
  482,781
  506,583
  531,594
  557,873
Operating income, $m
  4,116
  8,036
  8,351
  8,687
  9,046
  9,427
  9,832
  10,260
  10,715
  11,195
  11,703
  12,240
  12,805
  13,402
  14,032
  14,695
  15,393
  16,128
  16,903
  17,717
  18,574
  19,476
  20,424
  21,421
  22,470
  23,572
  24,730
  25,947
  27,226
  28,571
  29,983
EBITDA, $m
  13,139
  11,283
  11,725
  12,197
  12,700
  13,235
  13,803
  14,405
  15,043
  15,717
  16,430
  17,183
  17,977
  18,815
  19,699
  20,630
  21,610
  22,643
  23,729
  24,873
  26,076
  27,342
  28,673
  30,073
  31,545
  33,092
  34,718
  36,427
  38,223
  40,110
  42,093
Interest expense (income), $m
  0
  5,004
  5,277
  5,575
  5,892
  6,230
  6,589
  6,971
  7,376
  7,804
  8,257
  8,736
  9,242
  9,776
  10,339
  10,932
  11,558
  12,217
  12,910
  13,641
  14,409
  15,218
  16,068
  16,962
  17,903
  18,892
  19,931
  21,024
  22,172
  23,379
  24,647
Earnings before tax, $m
  6,796
  3,032
  3,074
  3,113
  3,154
  3,197
  3,242
  3,289
  3,339
  3,391
  3,445
  3,503
  3,563
  3,627
  3,693
  3,762
  3,835
  3,912
  3,992
  4,077
  4,165
  4,258
  4,356
  4,459
  4,567
  4,680
  4,799
  4,923
  5,054
  5,192
  5,336
Tax expense, $m
  2,189
  819
  830
  840
  852
  863
  875
  888
  902
  916
  930
  946
  962
  979
  997
  1,016
  1,036
  1,056
  1,078
  1,101
  1,125
  1,150
  1,176
  1,204
  1,233
  1,264
  1,296
  1,329
  1,365
  1,402
  1,441
Net income, $m
  4,596
  2,213
  2,244
  2,272
  2,302
  2,334
  2,367
  2,401
  2,437
  2,475
  2,515
  2,557
  2,601
  2,647
  2,696
  2,746
  2,800
  2,856
  2,914
  2,976
  3,041
  3,109
  3,180
  3,255
  3,334
  3,416
  3,503
  3,594
  3,690
  3,790
  3,895

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
  246,972
  256,654
  266,992
  278,006
  289,717
  302,150
  315,331
  329,287
  344,051
  359,654
  376,132
  393,522
  411,864
  431,201
  451,578
  473,041
  495,641
  519,431
  544,467
  570,808
  598,515
  627,655
  658,296
  690,511
  724,376
  759,970
  797,380
  836,692
  878,001
  921,405
Adjusted assets (=assets-cash), $m
  199,124
  246,972
  256,654
  266,992
  278,006
  289,717
  302,150
  315,331
  329,287
  344,051
  359,654
  376,132
  393,522
  411,864
  431,201
  451,578
  473,041
  495,641
  519,431
  544,467
  570,808
  598,515
  627,655
  658,296
  690,511
  724,376
  759,970
  797,380
  836,692
  878,001
  921,405
Revenue / Adjusted assets
  0.762
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
  0.638
Average production assets, $m
  31,242
  32,459
  33,731
  35,090
  36,538
  38,077
  39,711
  41,443
  43,278
  45,218
  47,269
  49,434
  51,720
  54,130
  56,672
  59,350
  62,171
  65,141
  68,268
  71,558
  75,020
  78,662
  82,491
  86,519
  90,752
  95,203
  99,881
  104,798
  109,965
  115,394
  121,098
Working capital, $m
  18,180
  30,096
  31,275
  32,535
  33,877
  35,304
  36,819
  38,426
  40,126
  41,925
  43,827
  45,835
  47,954
  50,189
  52,545
  55,028
  57,644
  60,398
  63,297
  66,348
  69,557
  72,934
  76,485
  80,219
  84,144
  88,271
  92,608
  97,167
  101,958
  106,991
  112,281
Total debt, $m
  142,970
  150,784
  159,274
  168,341
  178,000
  188,271
  199,175
  210,734
  222,974
  235,922
  249,605
  264,057
  279,308
  295,394
  312,352
  330,222
  349,046
  368,866
  389,730
  411,687
  434,787
  459,087
  484,643
  511,515
  539,767
  569,466
  600,683
  633,491
  667,968
  704,196
  742,261
Total liabilities, $m
  208,781
  216,595
  225,085
  234,152
  243,811
  254,082
  264,986
  276,545
  288,785
  301,733
  315,416
  329,868
  345,119
  361,205
  378,163
  396,033
  414,857
  434,677
  455,541
  477,498
  500,598
  524,898
  550,454
  577,326
  605,578
  635,277
  666,494
  699,302
  733,779
  770,007
  808,072
Total equity, $m
  29,170
  30,378
  31,568
  32,840
  34,195
  35,635
  37,164
  38,786
  40,502
  42,318
  44,237
  46,264
  48,403
  50,659
  53,038
  55,544
  58,184
  60,964
  63,890
  66,969
  70,209
  73,617
  77,202
  80,970
  84,933
  89,098
  93,476
  98,078
  102,913
  107,994
  113,333
Total liabilities and equity, $m
  237,951
  246,973
  256,653
  266,992
  278,006
  289,717
  302,150
  315,331
  329,287
  344,051
  359,653
  376,132
  393,522
  411,864
  431,201
  451,577
  473,041
  495,641
  519,431
  544,467
  570,807
  598,515
  627,656
  658,296
  690,511
  724,375
  759,970
  797,380
  836,692
  878,001
  921,405
Debt-to-equity ratio
  4.901
  4.960
  5.050
  5.130
  5.210
  5.280
  5.360
  5.430
  5.510
  5.570
  5.640
  5.710
  5.770
  5.830
  5.890
  5.950
  6.000
  6.050
  6.100
  6.150
  6.190
  6.240
  6.280
  6.320
  6.360
  6.390
  6.430
  6.460
  6.490
  6.520
  6.550
Adjusted equity ratio
  0.146
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123
  0.123

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,596
  2,213
  2,244
  2,272
  2,302
  2,334
  2,367
  2,401
  2,437
  2,475
  2,515
  2,557
  2,601
  2,647
  2,696
  2,746
  2,800
  2,856
  2,914
  2,976
  3,041
  3,109
  3,180
  3,255
  3,334
  3,416
  3,503
  3,594
  3,690
  3,790
  3,895
Depreciation, amort., depletion, $m
  9,023
  3,247
  3,374
  3,510
  3,654
  3,808
  3,972
  4,145
  4,328
  4,522
  4,727
  4,943
  5,172
  5,413
  5,667
  5,935
  6,217
  6,514
  6,827
  7,156
  7,502
  7,866
  8,249
  8,652
  9,075
  9,520
  9,988
  10,480
  10,996
  11,539
  12,110
Funds from operations, $m
  22,716
  5,460
  5,617
  5,782
  5,957
  6,142
  6,338
  6,546
  6,766
  6,998
  7,243
  7,501
  7,773
  8,060
  8,363
  8,681
  9,017
  9,370
  9,741
  10,132
  10,543
  10,975
  11,429
  11,907
  12,409
  12,937
  13,491
  14,074
  14,686
  15,329
  16,005
Change in working capital, $m
  2,924
  1,102
  1,180
  1,260
  1,342
  1,427
  1,515
  1,606
  1,701
  1,799
  1,901
  2,008
  2,119
  2,235
  2,356
  2,483
  2,615
  2,754
  2,899
  3,051
  3,210
  3,376
  3,551
  3,734
  3,926
  4,127
  4,338
  4,559
  4,791
  5,034
  5,289
Cash from operations, $m
  19,792
  4,358
  4,438
  4,522
  4,615
  4,715
  4,823
  4,940
  5,065
  5,199
  5,341
  5,493
  5,654
  5,825
  6,007
  6,198
  6,401
  6,616
  6,842
  7,081
  7,333
  7,598
  7,878
  8,173
  8,483
  8,810
  9,154
  9,515
  9,896
  10,296
  10,716
Maintenance CAPEX, $m
  0
  -3,124
  -3,246
  -3,373
  -3,509
  -3,654
  -3,808
  -3,971
  -4,144
  -4,328
  -4,522
  -4,727
  -4,943
  -5,172
  -5,413
  -5,667
  -5,935
  -6,217
  -6,514
  -6,827
  -7,156
  -7,502
  -7,866
  -8,249
  -8,652
  -9,075
  -9,520
  -9,988
  -10,480
  -10,996
  -11,539
New CAPEX, $m
  -6,992
  -1,218
  -1,272
  -1,359
  -1,448
  -1,539
  -1,634
  -1,732
  -1,834
  -1,940
  -2,051
  -2,166
  -2,286
  -2,411
  -2,541
  -2,678
  -2,821
  -2,970
  -3,127
  -3,290
  -3,462
  -3,642
  -3,830
  -4,027
  -4,234
  -4,451
  -4,678
  -4,917
  -5,167
  -5,429
  -5,704
Cash from investing activities, $m
  -25,352
  -4,342
  -4,518
  -4,732
  -4,957
  -5,193
  -5,442
  -5,703
  -5,978
  -6,268
  -6,573
  -6,893
  -7,229
  -7,583
  -7,954
  -8,345
  -8,756
  -9,187
  -9,641
  -10,117
  -10,618
  -11,144
  -11,696
  -12,276
  -12,886
  -13,526
  -14,198
  -14,905
  -15,647
  -16,425
  -17,243
Free cash flow, $m
  -5,560
  16
  -81
  -210
  -342
  -478
  -618
  -763
  -914
  -1,069
  -1,231
  -1,400
  -1,575
  -1,757
  -1,948
  -2,147
  -2,355
  -2,572
  -2,799
  -3,036
  -3,285
  -3,545
  -3,818
  -4,103
  -4,403
  -4,716
  -5,045
  -5,390
  -5,751
  -6,130
  -6,528
Issuance/(repayment) of debt, $m
  11,028
  7,814
  8,491
  9,066
  9,659
  10,271
  10,904
  11,559
  12,240
  12,948
  13,684
  14,451
  15,251
  16,086
  16,958
  17,870
  18,823
  19,820
  20,864
  21,957
  23,101
  24,300
  25,556
  26,872
  28,252
  29,699
  31,217
  32,808
  34,477
  36,228
  38,065
Issuance/(repurchase) of shares, $m
  -145
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  12
  103
  199
  299
  404
  514
  629
  749
  875
  1,007
  1,146
  1,291
  1,443
Cash from financing (excl. dividends), $m  
  10,834
  7,814
  8,491
  9,066
  9,659
  10,271
  10,904
  11,559
  12,240
  12,948
  13,684
  14,451
  15,251
  16,086
  16,958
  17,870
  18,823
  19,820
  20,876
  22,060
  23,300
  24,599
  25,960
  27,386
  28,881
  30,448
  32,092
  33,815
  35,623
  37,519
  39,508
Total cash flow (excl. dividends), $m
  5,009
  7,830
  8,410
  8,857
  9,317
  9,793
  10,285
  10,796
  11,326
  11,878
  12,453
  13,051
  13,676
  14,329
  15,011
  15,723
  16,469
  17,249
  18,077
  19,024
  20,015
  21,054
  22,142
  23,283
  24,479
  25,732
  27,047
  28,426
  29,872
  31,389
  32,981
Retained Cash Flow (-), $m
  -528
  -1,208
  -1,191
  -1,272
  -1,355
  -1,441
  -1,529
  -1,621
  -1,717
  -1,816
  -1,919
  -2,027
  -2,139
  -2,256
  -2,378
  -2,506
  -2,640
  -2,780
  -2,926
  -3,079
  -3,240
  -3,408
  -3,584
  -3,769
  -3,962
  -4,165
  -4,378
  -4,601
  -4,835
  -5,081
  -5,339
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
 
  6,623
  7,219
  7,585
  7,963
  8,352
  8,756
  9,175
  9,610
  10,062
  10,534
  11,025
  11,537
  12,073
  12,632
  13,217
  13,829
  14,469
  15,151
  15,944
  16,775
  17,646
  18,558
  19,514
  20,516
  21,567
  22,669
  23,824
  25,036
  26,308
  27,642
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
 
  6,059
  5,992
  5,660
  5,290
  4,889
  4,467
  4,032
  3,593
  3,158
  2,737
  2,336
  1,963
  1,621
  1,315
  1,047
  818
  625
  468
  344
  246
  172
  117
  77
  49
  31
  18
  11
  6
  3
  2
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
  99.9
  99.7
  99.4
  99.0
  98.5
  98.0
  97.4
  96.7
  96.0
  95.2
  94.4
  93.5

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 9.3
Price to Sales 0.3
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 2.2
Price to Free Cash Flow 3.3
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 3.8% 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 10 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 $41.5 billion.

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Stock chart of F Financial statements 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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