Intrinsic value of Brookfield Infrastructure Partners - BIP

Previous Close

$40.07

  Intrinsic Value

$517.28

stock screener

  Rating & Target

str. buy

+999%

Previous close

$40.07

 
Intrinsic value

$517.28

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of BIP 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 2017), $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 10.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  5,656
  8,739
  13,068
  18,962
  26,752
  36,778
  49,367
  64,822
  83,410
  105,354
  130,825
  159,947
  192,789
  229,381
  269,712
  313,739
  361,401
  412,621
  467,315
  525,400
  586,802
  651,457
  719,314
  790,343
  864,534
  941,896
  1,022,462
  1,106,286
  1,193,444
  1,284,033
Variable operating expenses, $m
  2,286
  2,922
  3,816
  5,031
  6,639
  8,707
  11,304
  14,493
  18,328
  22,855
  26,991
  32,999
  39,774
  47,324
  55,644
  64,728
  74,561
  85,128
  96,412
  108,395
  121,063
  134,402
  148,401
  163,056
  178,362
  194,322
  210,944
  228,238
  246,219
  264,909
Fixed operating expenses, $m
  595
  608
  621
  635
  649
  663
  678
  693
  708
  723
  739
  756
  772
  789
  807
  824
  843
  861
  880
  899
  919
  939
  960
  981
  1,003
  1,025
  1,047
  1,070
  1,094
  1,118
Total operating expenses, $m
  2,881
  3,530
  4,437
  5,666
  7,288
  9,370
  11,982
  15,186
  19,036
  23,578
  27,730
  33,755
  40,546
  48,113
  56,451
  65,552
  75,404
  85,989
  97,292
  109,294
  121,982
  135,341
  149,361
  164,037
  179,365
  195,347
  211,991
  229,308
  247,313
  266,027
Operating income, $m
  2,775
  5,208
  8,632
  13,295
  19,465
  27,408
  37,385
  49,636
  64,374
  81,775
  103,095
  126,192
  152,243
  181,268
  213,261
  248,188
  285,998
  326,632
  370,023
  416,106
  464,820
  516,115
  569,952
  626,307
  685,170
  746,549
  810,471
  876,978
  946,131
  1,018,007
EBITDA, $m
  6,675
  10,624
  16,175
  23,736
  33,735
  46,607
  62,773
  82,622
  106,498
  134,687
  167,409
  204,822
  247,018
  294,032
  345,851
  402,422
  463,663
  529,477
  599,755
  674,393
  753,292
  836,371
  923,567
  1,014,839
  1,110,175
  1,209,586
  1,313,114
  1,420,829
  1,532,828
  1,649,238
Interest expense (income), $m
  366
  620
  1,391
  2,515
  4,093
  6,241
  9,081
  12,735
  17,324
  22,957
  29,733
  37,731
  47,016
  57,630
  69,601
  82,939
  97,640
  113,688
  131,061
  149,730
  169,666
  190,838
  213,219
  236,786
  261,520
  287,410
  314,452
  342,651
  372,017
  402,571
  434,340
Earnings before tax, $m
  2,155
  3,817
  6,117
  9,202
  13,223
  18,327
  24,649
  32,312
  41,417
  52,043
  65,364
  79,177
  94,613
  111,667
  130,322
  150,548
  172,311
  195,572
  220,293
  246,440
  273,982
  302,896
  333,167
  364,787
  397,760
  432,097
  467,820
  504,961
  543,560
  583,667
Tax expense, $m
  582
  1,031
  1,651
  2,485
  3,570
  4,948
  6,655
  8,724
  11,183
  14,051
  17,648
  21,378
  25,545
  30,150
  35,187
  40,648
  46,524
  52,804
  59,479
  66,539
  73,975
  81,782
  89,955
  98,493
  107,395
  116,666
  126,311
  136,339
  146,761
  157,590
Net income, $m
  1,573
  2,786
  4,465
  6,718
  9,653
  13,379
  17,994
  23,588
  30,234
  37,991
  47,716
  57,799
  69,067
  81,517
  95,135
  109,900
  125,787
  142,767
  160,814
  179,901
  200,007
  221,114
  243,212
  266,295
  290,365
  315,431
  341,509
  368,622
  396,799
  426,077

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
  47,133
  72,821
  108,904
  158,014
  222,935
  306,484
  411,391
  540,183
  695,084
  877,947
  1,090,211
  1,332,888
  1,606,578
  1,911,511
  2,247,597
  2,614,495
  3,011,679
  3,438,508
  3,894,289
  4,378,337
  4,890,021
  5,428,805
  5,994,283
  6,586,195
  7,204,451
  7,849,137
  8,520,521
  9,219,053
  9,945,368
  10,700,278
Adjusted assets (=assets-cash), $m
  47,133
  72,821
  108,904
  158,014
  222,935
  306,484
  411,391
  540,183
  695,084
  877,947
  1,090,211
  1,332,888
  1,606,578
  1,911,511
  2,247,597
  2,614,495
  3,011,679
  3,438,508
  3,894,289
  4,378,337
  4,890,021
  5,428,805
  5,994,283
  6,586,195
  7,204,451
  7,849,137
  8,520,521
  9,219,053
  9,945,368
  10,700,278
Revenue / Adjusted assets
  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
  27,805
  42,959
  64,245
  93,216
  131,514
  180,801
  242,688
  318,665
  410,044
  517,919
  643,137
  786,297
  947,753
  1,127,638
  1,325,902
  1,542,343
  1,776,650
  2,028,444
  2,297,319
  2,582,868
  2,884,721
  3,202,561
  3,536,147
  3,885,328
  4,250,050
  4,630,363
  5,026,426
  5,438,504
  5,866,971
  6,312,308
Working capital, $m
  -1,210
  -1,870
  -2,797
  -4,058
  -5,725
  -7,871
  -10,565
  -13,872
  -17,850
  -22,546
  -27,997
  -34,229
  -41,257
  -49,088
  -57,718
  -67,140
  -77,340
  -88,301
  -100,005
  -112,436
  -125,576
  -139,412
  -153,933
  -169,133
  -185,010
  -201,566
  -218,807
  -236,745
  -255,397
  -274,783
Total debt, $m
  25,765
  46,572
  75,799
  115,578
  168,164
  235,839
  320,814
  425,135
  550,605
  698,724
  870,658
  1,067,226
  1,288,915
  1,535,911
  1,808,141
  2,105,328
  2,427,047
  2,772,778
  3,141,961
  3,534,040
  3,948,504
  4,384,919
  4,842,956
  5,322,405
  5,823,193
  6,345,388
  6,889,209
  7,455,020
  8,043,335
  8,654,812
Total liabilities, $m
  38,178
  58,985
  88,212
  127,991
  180,577
  248,252
  333,227
  437,548
  563,018
  711,137
  883,071
  1,079,639
  1,301,328
  1,548,324
  1,820,554
  2,117,741
  2,439,460
  2,785,191
  3,154,374
  3,546,453
  3,960,917
  4,397,332
  4,855,369
  5,334,818
  5,835,606
  6,357,801
  6,901,622
  7,467,433
  8,055,748
  8,667,225
Total equity, $m
  8,955
  13,836
  20,692
  30,023
  42,358
  58,232
  78,164
  102,635
  132,066
  166,810
  207,140
  253,249
  305,250
  363,187
  427,043
  496,754
  572,219
  653,316
  739,915
  831,884
  929,104
  1,031,473
  1,138,914
  1,251,377
  1,368,846
  1,491,336
  1,618,899
  1,751,620
  1,889,620
  2,033,053
Total liabilities and equity, $m
  47,133
  72,821
  108,904
  158,014
  222,935
  306,484
  411,391
  540,183
  695,084
  877,947
  1,090,211
  1,332,888
  1,606,578
  1,911,511
  2,247,597
  2,614,495
  3,011,679
  3,438,507
  3,894,289
  4,378,337
  4,890,021
  5,428,805
  5,994,283
  6,586,195
  7,204,452
  7,849,137
  8,520,521
  9,219,053
  9,945,368
  10,700,278
Debt-to-equity ratio
  2.880
  3.370
  3.660
  3.850
  3.970
  4.050
  4.100
  4.140
  4.170
  4.190
  4.200
  4.210
  4.220
  4.230
  4.230
  4.240
  4.240
  4.240
  4.250
  4.250
  4.250
  4.250
  4.250
  4.250
  4.250
  4.250
  4.260
  4.260
  4.260
  4.260
Adjusted equity ratio
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190
  0.190

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,573
  2,786
  4,465
  6,718
  9,653
  13,379
  17,994
  23,588
  30,234
  37,991
  47,716
  57,799
  69,067
  81,517
  95,135
  109,900
  125,787
  142,767
  160,814
  179,901
  200,007
  221,114
  243,212
  266,295
  290,365
  315,431
  341,509
  368,622
  396,799
  426,077
Depreciation, amort., depletion, $m
  3,900
  5,415
  7,544
  10,441
  14,271
  19,200
  25,388
  32,986
  42,124
  52,911
  64,314
  78,630
  94,775
  112,764
  132,590
  154,234
  177,665
  202,844
  229,732
  258,287
  288,472
  320,256
  353,615
  388,533
  425,005
  463,036
  502,643
  543,850
  586,697
  631,231
Funds from operations, $m
  5,473
  8,202
  12,009
  17,159
  23,924
  32,578
  43,382
  56,574
  72,358
  90,902
  112,030
  136,429
  163,842
  194,281
  227,725
  264,134
  303,452
  345,612
  390,546
  438,188
  488,479
  541,370
  596,826
  654,827
  715,370
  778,467
  844,151
  912,472
  983,496
  1,057,307
Change in working capital, $m
  -454
  -660
  -927
  -1,261
  -1,667
  -2,146
  -2,694
  -3,307
  -3,978
  -4,696
  -5,451
  -6,232
  -7,028
  -7,831
  -8,631
  -9,422
  -10,200
  -10,961
  -11,704
  -12,430
  -13,140
  -13,836
  -14,521
  -15,200
  -15,877
  -16,556
  -17,241
  -17,938
  -18,652
  -19,386
Cash from operations, $m
  5,927
  8,861
  12,936
  18,420
  25,591
  34,724
  46,076
  59,881
  76,336
  95,598
  117,481
  142,661
  170,871
  202,111
  236,356
  273,556
  313,651
  356,573
  402,250
  450,618
  501,619
  555,206
  611,348
  670,028
  731,246
  795,023
  861,392
  930,410
  1,002,148
  1,076,694
Maintenance CAPEX, $m
  -1,738
  -2,780
  -4,296
  -6,424
  -9,322
  -13,151
  -18,080
  -24,269
  -31,866
  -41,004
  -51,792
  -64,314
  -78,630
  -94,775
  -112,764
  -132,590
  -154,234
  -177,665
  -202,844
  -229,732
  -258,287
  -288,472
  -320,256
  -353,615
  -388,533
  -425,005
  -463,036
  -502,643
  -543,850
  -586,697
New CAPEX, $m
  -10,427
  -15,154
  -21,286
  -28,971
  -38,298
  -49,287
  -61,887
  -75,977
  -91,379
  -107,875
  -125,219
  -143,160
  -161,455
  -179,886
  -198,264
  -216,440
  -234,307
  -251,795
  -268,874
  -285,549
  -301,853
  -317,840
  -333,586
  -349,181
  -364,722
  -380,313
  -396,063
  -412,078
  -428,468
  -445,337
Cash from investing activities, $m
  -12,165
  -17,934
  -25,582
  -35,395
  -47,620
  -62,438
  -79,967
  -100,246
  -123,245
  -148,879
  -177,011
  -207,474
  -240,085
  -274,661
  -311,028
  -349,030
  -388,541
  -429,460
  -471,718
  -515,281
  -560,140
  -606,312
  -653,842
  -702,796
  -753,255
  -805,318
  -859,099
  -914,721
  -972,318
  -1,032,034
Free cash flow, $m
  -6,238
  -9,073
  -12,646
  -16,976
  -22,029
  -27,715
  -33,891
  -40,364
  -46,910
  -53,281
  -59,530
  -64,813
  -69,214
  -72,550
  -74,672
  -75,475
  -74,890
  -72,887
  -69,469
  -64,663
  -58,520
  -51,106
  -42,495
  -32,768
  -22,008
  -10,296
  2,294
  15,689
  29,830
  44,660
Issuance/(repayment) of debt, $m
  14,288
  20,807
  29,227
  39,779
  52,586
  67,675
  84,975
  104,321
  125,470
  148,119
  171,934
  196,568
  221,689
  246,996
  272,230
  297,187
  321,719
  345,731
  369,183
  392,079
  414,464
  436,416
  458,037
  479,449
  500,788
  522,196
  543,821
  565,811
  588,315
  611,477
Issuance/(repurchase) of shares, $m
  1,795
  2,094
  2,391
  2,613
  2,682
  2,496
  1,938
  882
  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  
  16,083
  22,901
  31,618
  42,392
  55,268
  70,171
  86,913
  105,203
  125,470
  148,119
  171,934
  196,568
  221,689
  246,996
  272,230
  297,187
  321,719
  345,731
  369,183
  392,079
  414,464
  436,416
  458,037
  479,449
  500,788
  522,196
  543,821
  565,811
  588,315
  611,477
Total cash flow (excl. dividends), $m
  9,845
  13,829
  18,972
  25,417
  33,239
  42,456
  53,023
  64,839
  78,560
  94,839
  112,404
  131,755
  152,475
  174,446
  197,558
  221,713
  246,829
  272,844
  299,714
  327,416
  355,944
  385,310
  415,542
  446,681
  478,779
  511,900
  546,114
  581,501
  618,145
  656,137
Retained Cash Flow (-), $m
  -3,368
  -4,881
  -6,856
  -9,331
  -12,335
  -15,874
  -19,932
  -24,470
  -29,431
  -34,744
  -40,330
  -46,109
  -52,001
  -57,937
  -63,856
  -69,711
  -75,465
  -81,097
  -86,598
  -91,969
  -97,220
  -102,369
  -107,441
  -112,463
  -117,469
  -122,490
  -127,563
  -132,721
  -138,000
  -143,433
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
  6,477
  8,948
  12,116
  16,086
  20,904
  26,581
  33,090
  40,369
  49,129
  60,095
  72,074
  85,647
  100,474
  116,509
  133,701
  152,002
  171,364
  191,747
  213,116
  235,447
  258,724
  282,941
  308,101
  334,218
  361,311
  389,410
  418,551
  448,780
  480,145
  512,704
Discount rate, %
  9.40
  9.87
  10.36
  10.88
  11.43
  12.00
  12.60
  13.23
  13.89
  14.58
  15.31
  16.08
  16.88
  17.73
  18.61
  19.54
  20.52
  21.54
  22.62
  23.75
  24.94
  26.19
  27.50
  28.87
  30.32
  31.83
  33.42
  35.09
  36.85
  38.69
PV of cash for distribution, $m
  5,920
  7,412
  9,013
  10,642
  12,170
  13,469
  14,422
  14,944
  15,242
  15,405
  15,037
  14,314
  13,224
  11,863
  10,333
  8,740
  7,178
  5,721
  4,424
  3,317
  2,410
  1,695
  1,154
  759
  482
  295
  174
  99
  54
  28
Current shareholders' claim on cash, %
  85.3
  75.7
  69.3
  64.9
  61.9
  60.0
  58.9
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6
  58.6

Brookfield Infrastructure Partners L.P. owns and operates utilities, transport, energy and communications infrastructure businesses in North and South America, Europe and Asia Pacific. The Company's segments include utilities, transport, energy, communications infrastructure and other. The utilities segment consists of regulated businesses, including regulated distribution (electricity and natural gas connections), electricity transmission and a regulated terminal (coal export terminal). The transport segment consists of open access systems that provide transportation, storage and handling services for freight, bulk commodities and passengers. The Company's energy segment consists of systems that provide transportation, storage and distribution services. The Company's communications infrastructure segment provides services and infrastructure to the media broadcasting and telecommunication sectors.

FINANCIAL RATIOS  of  Brookfield Infrastructure Partners (BIP)

Valuation Ratios
P/E Ratio 27.9
Price to Sales 4.9
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 13.8
Price to Free Cash Flow 165
Growth Rates
Sales Growth Rate 14%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 32.7%
Cap. Spend. - 3 Yr. Gr. Rate 10.2%
Financial Strength
Quick Ratio 1
Current Ratio 0.1
LT Debt to Equity 155.5%
Total Debt to Equity 166.9%
Interest Coverage 2
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 3.2%
Return On Total Capital 3%
Ret/ On T. Cap. - 3 Yr. Avg. 2.2%
Return On Equity 8.2%
Return On Equity - 3 Yr. Avg. 6.1%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 49.7%
Gross Margin - 3 Yr. Avg. 54.3%
EBITDA Margin 64.1%
EBITDA Margin - 3 Yr. Avg. 58.8%
Operating Margin 20.8%
Oper. Margin - 3 Yr. Avg. 26.9%
Pre-Tax Margin 25.7%
Pre-Tax Margin - 3 Yr. Avg. 21%
Net Profit Margin 17.6%
Net Profit Margin - 3 Yr. Avg. 12.6%
Effective Tax Rate 2.8%
Eff/ Tax Rate - 3 Yr. Avg. 8.9%
Payout Ratio 145.8%

BIP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the BIP stock intrinsic value calculation we used $3535 million for the last fiscal year's total revenue generated by Brookfield Infrastructure Partners. The default revenue input number comes from 2017 income statement of Brookfield Infrastructure Partners. 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 BIP stock valuation model: a) initial revenue growth rate of 60% 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 9.4%, whose default value for BIP is calculated based on our internal credit rating of Brookfield Infrastructure Partners, 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 Infrastructure Partners.
    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 BIP stock the variable cost ratio is equal to 52.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $582 million in the base year in the intrinsic value calculation for BIP 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 Brookfield Infrastructure Partners.

Corporate tax rate of 27% is the nominal tax rate for Brookfield Infrastructure Partners. 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 BIP 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 BIP are equal to 491.6%.

Life of production assets of 10 years is the average useful life of capital assets used in Brookfield Infrastructure Partners 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 BIP is equal to -21.4%. 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 - $5587 million for Brookfield Infrastructure Partners - 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 259 million for Brookfield Infrastructure Partners 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 Infrastructure Partners at the current share price and the inputted number of shares is $10.4 billion.

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