Intrinsic value of Broadcom Inc. - AVGO

Previous Close

$273.78

  Intrinsic Value

$370.03

stock screener

  Rating & Target

buy

+35%

Previous close

$273.78

 
Intrinsic value

$370.03

 
Up/down potential

+35%

 
Rating

buy

We calculate the intrinsic value of AVGO 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 0001), $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 108.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  12.40
  11.66
  10.99
  10.39
  9.86
  9.37
  8.93
  8.54
  8.19
  7.87
  7.58
  7.32
  7.09
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
Revenue, $m
  23,433
  26,165
  29,042
  32,061
  35,221
  38,521
  41,961
  45,545
  49,273
  53,149
  57,178
  61,365
  65,715
  70,237
  74,938
  79,827
  84,913
  90,206
  95,718
  101,461
  107,447
  113,689
  120,202
  127,001
  134,100
  141,518
  149,270
  157,376
  165,855
  174,725
Variable operating expenses, $m
  4,021
  4,459
  4,921
  5,405
  5,911
  6,441
  6,992
  7,567
  8,165
  8,787
  9,169
  9,840
  10,538
  11,263
  12,017
  12,801
  13,617
  14,466
  15,349
  16,270
  17,230
  18,231
  19,276
  20,366
  21,504
  22,694
  23,937
  25,237
  26,597
  28,019
Fixed operating expenses, $m
  12,744
  13,025
  13,311
  13,604
  13,903
  14,209
  14,522
  14,841
  15,168
  15,502
  15,843
  16,191
  16,547
  16,911
  17,283
  17,664
  18,052
  18,449
  18,855
  19,270
  19,694
  20,127
  20,570
  21,023
  21,485
  21,958
  22,441
  22,935
  23,439
  23,955
Total operating expenses, $m
  16,765
  17,484
  18,232
  19,009
  19,814
  20,650
  21,514
  22,408
  23,333
  24,289
  25,012
  26,031
  27,085
  28,174
  29,300
  30,465
  31,669
  32,915
  34,204
  35,540
  36,924
  38,358
  39,846
  41,389
  42,989
  44,652
  46,378
  48,172
  50,036
  51,974
Operating income, $m
  6,668
  8,681
  10,810
  13,052
  15,406
  17,871
  20,447
  23,136
  25,940
  28,861
  32,166
  35,333
  38,630
  42,062
  45,637
  49,362
  53,244
  57,291
  61,514
  65,921
  70,523
  75,331
  80,356
  85,612
  91,111
  96,866
  102,892
  109,205
  115,819
  122,751
EBITDA, $m
  9,379
  11,679
  14,108
  16,665
  19,349
  22,159
  25,095
  28,158
  31,351
  34,677
  38,140
  41,744
  45,496
  49,401
  53,467
  57,702
  62,115
  66,716
  71,514
  76,521
  81,749
  87,209
  92,915
  98,881
  105,122
  111,652
  118,488
  125,647
  133,147
  141,007
Interest expense (income), $m
  310
  945
  1,101
  1,267
  1,441
  1,625
  1,817
  2,017
  2,226
  2,444
  2,670
  2,905
  3,150
  3,404
  3,669
  3,943
  4,229
  4,526
  4,835
  5,156
  5,491
  5,840
  6,203
  6,582
  6,978
  7,391
  7,822
  8,272
  8,743
  9,236
  9,750
Earnings before tax, $m
  5,723
  7,581
  9,544
  11,611
  13,781
  16,054
  18,430
  20,910
  23,496
  26,191
  29,261
  32,183
  35,225
  38,394
  41,694
  45,133
  48,718
  52,457
  56,358
  60,430
  64,683
  69,128
  73,774
  78,634
  83,720
  89,044
  94,620
  100,461
  106,583
  113,001
Tax expense, $m
  1,545
  2,047
  2,577
  3,135
  3,721
  4,335
  4,976
  5,646
  6,344
  7,072
  7,900
  8,689
  9,511
  10,366
  11,257
  12,186
  13,154
  14,163
  15,217
  16,316
  17,464
  18,664
  19,919
  21,231
  22,604
  24,042
  25,547
  27,125
  28,777
  30,510
Net income, $m
  4,178
  5,534
  6,967
  8,476
  10,060
  11,719
  13,454
  15,265
  17,152
  19,119
  21,360
  23,493
  25,715
  28,028
  30,437
  32,947
  35,564
  38,293
  41,141
  44,114
  47,219
  50,463
  53,855
  57,403
  61,116
  65,002
  69,073
  73,337
  77,806
  82,491

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
Total assets, $m
  54,118
  60,428
  67,072
  74,044
  81,341
  88,962
  96,909
  105,184
  113,794
  122,746
  132,050
  141,719
  151,767
  162,210
  173,067
  184,357
  196,103
  208,328
  221,059
  234,321
  248,145
  262,562
  277,603
  293,304
  309,701
  326,831
  344,735
  363,456
  383,036
  403,523
Adjusted assets (=assets-cash), $m
  54,118
  60,428
  67,072
  74,044
  81,341
  88,962
  96,909
  105,184
  113,794
  122,746
  132,050
  141,719
  151,767
  162,210
  173,067
  184,357
  196,103
  208,328
  221,059
  234,321
  248,145
  262,562
  277,603
  293,304
  309,701
  326,831
  344,735
  363,456
  383,036
  403,523
Revenue / Adjusted assets
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
  0.433
Average production assets, $m
  23,503
  26,244
  29,129
  32,157
  35,326
  38,636
  42,087
  45,681
  49,421
  53,308
  57,349
  61,549
  65,912
  70,448
  75,163
  80,066
  85,167
  90,477
  96,006
  101,766
  107,769
  114,030
  120,563
  127,382
  134,503
  141,942
  149,718
  157,848
  166,352
  175,250
Working capital, $m
  2,789
  3,114
  3,456
  3,815
  4,191
  4,584
  4,993
  5,420
  5,863
  6,325
  6,804
  7,302
  7,820
  8,358
  8,918
  9,499
  10,105
  10,735
  11,390
  12,074
  12,786
  13,529
  14,304
  15,113
  15,958
  16,841
  17,763
  18,728
  19,737
  20,792
Total debt, $m
  20,382
  23,455
  26,690
  30,085
  33,639
  37,351
  41,221
  45,251
  49,444
  53,803
  58,335
  63,043
  67,937
  73,022
  78,310
  83,808
  89,528
  95,482
  101,682
  108,140
  114,873
  121,894
  129,219
  136,865
  144,850
  153,193
  161,912
  171,029
  180,564
  190,542
Total liabilities, $m
  26,356
  29,429
  32,664
  36,059
  39,613
  43,325
  47,195
  51,225
  55,418
  59,777
  64,309
  69,017
  73,911
  78,996
  84,284
  89,782
  95,502
  101,456
  107,656
  114,114
  120,847
  127,868
  135,193
  142,839
  150,824
  159,167
  167,886
  177,003
  186,538
  196,516
Total equity, $m
  27,763
  31,000
  34,408
  37,984
  41,728
  45,638
  49,714
  53,959
  58,376
  62,969
  67,742
  72,702
  77,857
  83,214
  88,783
  94,575
  100,601
  106,872
  113,403
  120,207
  127,299
  134,694
  142,411
  150,465
  158,877
  167,664
  176,849
  186,453
  196,497
  207,007
Total liabilities and equity, $m
  54,119
  60,429
  67,072
  74,043
  81,341
  88,963
  96,909
  105,184
  113,794
  122,746
  132,051
  141,719
  151,768
  162,210
  173,067
  184,357
  196,103
  208,328
  221,059
  234,321
  248,146
  262,562
  277,604
  293,304
  309,701
  326,831
  344,735
  363,456
  383,035
  403,523
Debt-to-equity ratio
  0.730
  0.760
  0.780
  0.790
  0.810
  0.820
  0.830
  0.840
  0.850
  0.850
  0.860
  0.870
  0.870
  0.880
  0.880
  0.890
  0.890
  0.890
  0.900
  0.900
  0.900
  0.900
  0.910
  0.910
  0.910
  0.910
  0.920
  0.920
  0.920
  0.920
Adjusted equity ratio
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513
  0.513

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  4,178
  5,534
  6,967
  8,476
  10,060
  11,719
  13,454
  15,265
  17,152
  19,119
  21,360
  23,493
  25,715
  28,028
  30,437
  32,947
  35,564
  38,293
  41,141
  44,114
  47,219
  50,463
  53,855
  57,403
  61,116
  65,002
  69,073
  73,337
  77,806
  82,491
Depreciation, amort., depletion, $m
  2,712
  2,997
  3,298
  3,613
  3,943
  4,288
  4,648
  5,022
  5,411
  5,816
  5,974
  6,411
  6,866
  7,338
  7,829
  8,340
  8,872
  9,425
  10,001
  10,601
  11,226
  11,878
  12,559
  13,269
  14,011
  14,786
  15,596
  16,443
  17,328
  18,255
Funds from operations, $m
  6,890
  8,531
  10,265
  12,089
  14,003
  16,008
  18,102
  20,287
  22,564
  24,936
  27,334
  29,905
  32,580
  35,366
  38,266
  41,287
  44,436
  47,718
  51,142
  54,714
  58,445
  62,341
  66,414
  70,672
  75,126
  79,788
  84,668
  89,779
  95,134
  100,746
Change in working capital, $m
  308
  325
  342
  359
  376
  393
  409
  426
  444
  461
  479
  498
  518
  538
  559
  582
  605
  630
  656
  683
  712
  743
  775
  809
  845
  883
  923
  965
  1,009
  1,056
Cash from operations, $m
  6,582
  8,206
  9,922
  11,730
  13,627
  15,615
  17,692
  19,860
  22,120
  24,475
  26,855
  29,407
  32,063
  34,828
  37,707
  40,706
  43,831
  47,088
  50,486
  54,031
  57,732
  61,598
  65,639
  69,863
  74,282
  78,905
  83,746
  88,815
  94,125
  99,690
Maintenance CAPEX, $m
  -2,179
  -2,448
  -2,734
  -3,034
  -3,350
  -3,680
  -4,025
  -4,384
  -4,758
  -5,148
  -5,553
  -5,974
  -6,411
  -6,866
  -7,338
  -7,829
  -8,340
  -8,872
  -9,425
  -10,001
  -10,601
  -11,226
  -11,878
  -12,559
  -13,269
  -14,011
  -14,786
  -15,596
  -16,443
  -17,328
New CAPEX, $m
  -2,583
  -2,741
  -2,885
  -3,028
  -3,169
  -3,310
  -3,451
  -3,594
  -3,739
  -3,888
  -4,041
  -4,199
  -4,364
  -4,535
  -4,715
  -4,903
  -5,101
  -5,309
  -5,529
  -5,760
  -6,004
  -6,261
  -6,532
  -6,819
  -7,121
  -7,440
  -7,776
  -8,130
  -8,504
  -8,897
Cash from investing activities, $m
  -4,762
  -5,189
  -5,619
  -6,062
  -6,519
  -6,990
  -7,476
  -7,978
  -8,497
  -9,036
  -9,594
  -10,173
  -10,775
  -11,401
  -12,053
  -12,732
  -13,441
  -14,181
  -14,954
  -15,761
  -16,605
  -17,487
  -18,410
  -19,378
  -20,390
  -21,451
  -22,562
  -23,726
  -24,947
  -26,225
Free cash flow, $m
  1,819
  3,017
  4,303
  5,668
  7,109
  8,625
  10,216
  11,882
  13,623
  15,439
  17,261
  19,233
  21,288
  23,426
  25,654
  27,973
  30,389
  32,907
  35,532
  38,270
  41,128
  44,111
  47,228
  50,485
  53,892
  57,455
  61,184
  65,089
  69,179
  73,464
Issuance/(repayment) of debt, $m
  2,889
  3,073
  3,235
  3,395
  3,554
  3,712
  3,870
  4,030
  4,193
  4,360
  4,531
  4,709
  4,893
  5,086
  5,287
  5,498
  5,720
  5,954
  6,200
  6,459
  6,732
  7,021
  7,325
  7,646
  7,985
  8,342
  8,719
  9,117
  9,536
  9,977
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  2,889
  3,073
  3,235
  3,395
  3,554
  3,712
  3,870
  4,030
  4,193
  4,360
  4,531
  4,709
  4,893
  5,086
  5,287
  5,498
  5,720
  5,954
  6,200
  6,459
  6,732
  7,021
  7,325
  7,646
  7,985
  8,342
  8,719
  9,117
  9,536
  9,977
Total cash flow (excl. dividends), $m
  4,708
  6,090
  7,539
  9,063
  10,662
  12,337
  14,086
  15,912
  17,816
  19,798
  21,792
  23,942
  26,181
  28,512
  30,941
  33,471
  36,109
  38,861
  41,732
  44,729
  47,860
  51,132
  54,553
  58,132
  61,877
  65,797
  69,904
  74,206
  78,715
  83,442
Retained Cash Flow (-), $m
  -3,060
  -3,237
  -3,408
  -3,577
  -3,743
  -3,910
  -4,077
  -4,245
  -4,417
  -4,592
  -4,773
  -4,960
  -5,155
  -5,357
  -5,569
  -5,792
  -6,026
  -6,272
  -6,531
  -6,804
  -7,092
  -7,396
  -7,716
  -8,055
  -8,411
  -8,788
  -9,185
  -9,603
  -10,045
  -10,510
Prev. year cash balance distribution, $m
  1,954
  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
  3,602
  2,853
  4,131
  5,486
  6,919
  8,427
  10,010
  11,667
  13,399
  15,206
  17,019
  18,982
  21,026
  23,155
  25,371
  27,679
  30,084
  32,589
  35,201
  37,926
  40,768
  43,737
  46,837
  50,077
  53,465
  57,009
  60,719
  64,602
  68,670
  72,932
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  3,454
  2,612
  3,595
  4,517
  5,363
  6,116
  6,762
  7,292
  7,697
  7,972
  8,082
  8,100
  7,995
  7,774
  7,449
  7,034
  6,546
  6,002
  5,420
  4,819
  4,217
  3,629
  3,070
  2,551
  2,080
  1,663
  1,303
  999
  750
  549
Current shareholders' claim on cash, %
  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

Broadcom Limited is a designer, developer and global supplier of a range of semiconductor devices with a focus on digital and mixed signal complementary metal oxide semiconductor (CMOS)-based devices and analog III-V based products. The Company operates through four segments: Wired Infrastructure, Wireless Communications, Enterprise Storage, and Industrial & Other. It offers a range of products that are used in end-products, such as enterprise and data center networking, home connectivity, set-top boxes (STBs), broadband access, telecommunication equipment, smartphones, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Its product portfolio ranges from discrete devices to complex sub-systems that include multiple device types, and also includes firmware for interfacing between analog and digital systems. Its products include mechanical hardware that interfaces with optoelectronic or capacitive sensors.

FINANCIAL RATIOS  of  Broadcom Inc. (AVGO)

Valuation Ratios
P/E Ratio 66.1
Price to Sales 6.3
Price to Book 5.5
Price to Tangible Book
Price to Cash Flow 17.1
Price to Free Cash Flow 20.4
Growth Rates
Sales Growth Rate 33.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 47.9%
Cap. Spend. - 3 Yr. Gr. Rate 21.2%
Financial Strength
Quick Ratio 96
Current Ratio 0.3
LT Debt to Equity 85.9%
Total Debt to Equity 86.5%
Interest Coverage 7
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 4.2%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. 4.3%
Return On Equity 8.6%
Return On Equity - 3 Yr. Avg. 9.4%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 48.4%
Gross Margin - 3 Yr. Avg. 48.6%
EBITDA Margin 39%
EBITDA Margin - 3 Yr. Avg. 30.6%
Operating Margin 12.6%
Oper. Margin - 3 Yr. Avg. 10.8%
Pre-Tax Margin 10.3%
Pre-Tax Margin - 3 Yr. Avg. 7.8%
Net Profit Margin 9.6%
Net Profit Margin - 3 Yr. Avg. 5.5%
Effective Tax Rate 1.9%
Eff/ Tax Rate - 3 Yr. Avg. -17%
Payout Ratio 103.1%

AVGO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AVGO stock intrinsic value calculation we used $20848 million for the last fiscal year's total revenue generated by Broadcom Inc.. The default revenue input number comes from 0001 income statement of Broadcom Inc.. 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 AVGO stock valuation model: a) initial revenue growth rate of 12.4% 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 4.3%, whose default value for AVGO is calculated based on our internal credit rating of Broadcom Inc., 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 Broadcom Inc..
    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 AVGO stock the variable cost ratio is equal to 17.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $12470 million in the base year in the intrinsic value calculation for AVGO 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 5.4% for Broadcom Inc..

Corporate tax rate of 27% is the nominal tax rate for Broadcom Inc.. 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 AVGO 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 AVGO are equal to 100.3%.

Life of production assets of 9.6 years is the average useful life of capital assets used in Broadcom Inc. 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 AVGO is equal to 11.9%. 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 - $26657 million for Broadcom Inc. - 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 396.121 million for Broadcom Inc. 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 Broadcom Inc. at the current share price and the inputted number of shares is $108.5 billion.

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