Intrinsic value of Salesforce.com - CRM

Previous Close

$137.04

  Intrinsic Value

$79.03

stock screener

  Rating & Target

sell

-42%

Previous close

$137.04

 
Intrinsic value

$79.03

 
Up/down potential

-42%

 
Rating

sell

We calculate the intrinsic value of CRM 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 100.6

 

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, %
  25.40
  23.36
  21.52
  19.87
  18.38
  17.05
  15.84
  14.76
  13.78
  12.90
  12.11
  11.40
  10.76
  10.19
  9.67
  9.20
  8.78
  8.40
  8.06
  7.76
  7.48
  7.23
  7.01
  6.81
  6.63
  6.46
  6.32
  6.19
  6.07
  5.96
Revenue, $m
  13,142
  16,212
  19,701
  23,616
  27,958
  32,724
  37,908
  43,502
  49,497
  55,884
  62,653
  69,797
  77,308
  85,182
  93,416
  102,011
  110,967
  120,291
  129,989
  140,070
  150,548
  161,436
  172,751
  184,512
  196,740
  209,458
  222,692
  236,468
  250,816
  265,767
Variable operating expenses, $m
  11,854
  14,429
  17,357
  20,641
  24,283
  28,282
  32,630
  37,323
  42,353
  47,711
  52,561
  58,554
  64,855
  71,461
  78,369
  85,579
  93,093
  100,915
  109,051
  117,509
  126,299
  135,433
  144,925
  154,792
  165,050
  175,720
  186,822
  198,379
  210,416
  222,959
Fixed operating expenses, $m
  653
  667
  682
  697
  712
  728
  744
  761
  777
  794
  812
  830
  848
  867
  886
  905
  925
  945
  966
  987
  1,009
  1,031
  1,054
  1,077
  1,101
  1,125
  1,150
  1,175
  1,201
  1,228
Total operating expenses, $m
  12,507
  15,096
  18,039
  21,338
  24,995
  29,010
  33,374
  38,084
  43,130
  48,505
  53,373
  59,384
  65,703
  72,328
  79,255
  86,484
  94,018
  101,860
  110,017
  118,496
  127,308
  136,464
  145,979
  155,869
  166,151
  176,845
  187,972
  199,554
  211,617
  224,187
Operating income, $m
  635
  1,115
  1,663
  2,278
  2,962
  3,714
  4,533
  5,418
  6,367
  7,378
  9,280
  10,413
  11,604
  12,854
  14,161
  15,526
  16,949
  18,430
  19,972
  21,574
  23,240
  24,972
  26,772
  28,643
  30,589
  32,613
  34,720
  36,914
  39,199
  41,581
EBITDA, $m
  2,023
  2,634
  3,330
  4,112
  4,981
  5,936
  6,976
  8,099
  9,303
  10,586
  11,947
  13,384
  14,896
  16,481
  18,138
  19,869
  21,673
  23,552
  25,506
  27,538
  29,650
  31,845
  34,126
  36,498
  38,965
  41,530
  44,201
  46,981
  49,877
  52,895
Interest expense (income), $m
  55
  93
  252
  435
  644
  878
  1,137
  1,422
  1,732
  2,066
  2,425
  2,806
  3,211
  3,638
  4,087
  4,558
  5,050
  5,564
  6,099
  6,656
  7,236
  7,839
  8,465
  9,116
  9,792
  10,495
  11,226
  11,986
  12,777
  13,601
  14,458
Earnings before tax, $m
  542
  864
  1,227
  1,634
  2,084
  2,577
  3,111
  3,686
  4,300
  4,954
  6,474
  7,202
  7,966
  8,767
  9,604
  10,476
  11,385
  12,331
  13,315
  14,338
  15,402
  16,507
  17,656
  18,851
  20,094
  21,387
  22,734
  24,137
  25,598
  27,122
Tax expense, $m
  146
  233
  331
  441
  563
  696
  840
  995
  1,161
  1,338
  1,748
  1,944
  2,151
  2,367
  2,593
  2,829
  3,074
  3,329
  3,595
  3,871
  4,158
  4,457
  4,767
  5,090
  5,425
  5,775
  6,138
  6,517
  6,912
  7,323
Net income, $m
  396
  630
  896
  1,193
  1,522
  1,881
  2,271
  2,691
  3,139
  3,616
  4,726
  5,257
  5,815
  6,400
  7,011
  7,648
  8,311
  9,002
  9,720
  10,467
  11,243
  12,050
  12,889
  13,761
  14,668
  15,613
  16,596
  17,620
  18,687
  19,799

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
  27,551
  33,987
  41,303
  49,510
  58,612
  68,603
  79,471
  91,199
  103,767
  117,157
  131,348
  146,324
  162,071
  178,578
  195,841
  213,859
  232,636
  252,183
  272,513
  293,649
  315,614
  338,440
  362,161
  386,817
  412,452
  439,115
  466,859
  495,740
  525,820
  557,163
Adjusted assets (=assets-cash), $m
  27,551
  33,987
  41,303
  49,510
  58,612
  68,603
  79,471
  91,199
  103,767
  117,157
  131,348
  146,324
  162,071
  178,578
  195,841
  213,859
  232,636
  252,183
  272,513
  293,649
  315,614
  338,440
  362,161
  386,817
  412,452
  439,115
  466,859
  495,740
  525,820
  557,163
Revenue / Adjusted assets
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
Average production assets, $m
  7,609
  9,387
  11,407
  13,674
  16,188
  18,947
  21,949
  25,188
  28,659
  32,357
  36,276
  40,412
  44,761
  49,320
  54,088
  59,064
  64,250
  69,649
  75,264
  81,101
  87,167
  93,471
  100,023
  106,832
  113,912
  121,276
  128,938
  136,915
  145,222
  153,879
Working capital, $m
  -4,994
  -6,161
  -7,487
  -8,974
  -10,624
  -12,435
  -14,405
  -16,531
  -18,809
  -21,236
  -23,808
  -26,523
  -29,377
  -32,369
  -35,498
  -38,764
  -42,168
  -45,711
  -49,396
  -53,227
  -57,208
  -61,346
  -65,645
  -70,114
  -74,761
  -79,594
  -84,623
  -89,858
  -95,310
  -100,991
Total debt, $m
  4,659
  8,057
  11,920
  16,253
  21,059
  26,335
  32,073
  38,265
  44,901
  51,971
  59,464
  67,371
  75,685
  84,401
  93,516
  103,030
  112,944
  123,264
  133,999
  145,159
  156,756
  168,808
  181,333
  194,351
  207,887
  221,965
  236,613
  251,863
  267,745
  284,294
Total liabilities, $m
  14,547
  17,945
  21,808
  26,141
  30,947
  36,223
  41,961
  48,153
  54,789
  61,859
  69,352
  77,259
  85,573
  94,289
  103,404
  112,918
  122,832
  133,152
  143,887
  155,047
  166,644
  178,696
  191,221
  204,239
  217,775
  231,853
  246,501
  261,751
  277,633
  294,182
Total equity, $m
  13,004
  16,042
  19,495
  23,369
  27,665
  32,381
  37,510
  43,046
  48,978
  55,298
  61,996
  69,065
  76,497
  84,289
  92,437
  100,941
  109,804
  119,030
  128,626
  138,602
  148,970
  159,744
  170,940
  182,578
  194,677
  207,262
  220,357
  233,989
  248,187
  262,981
Total liabilities and equity, $m
  27,551
  33,987
  41,303
  49,510
  58,612
  68,604
  79,471
  91,199
  103,767
  117,157
  131,348
  146,324
  162,070
  178,578
  195,841
  213,859
  232,636
  252,182
  272,513
  293,649
  315,614
  338,440
  362,161
  386,817
  412,452
  439,115
  466,858
  495,740
  525,820
  557,163
Debt-to-equity ratio
  0.360
  0.500
  0.610
  0.700
  0.760
  0.810
  0.860
  0.890
  0.920
  0.940
  0.960
  0.980
  0.990
  1.000
  1.010
  1.020
  1.030
  1.040
  1.040
  1.050
  1.050
  1.060
  1.060
  1.060
  1.070
  1.070
  1.070
  1.080
  1.080
  1.080
Adjusted equity ratio
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472
  0.472

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  396
  630
  896
  1,193
  1,522
  1,881
  2,271
  2,691
  3,139
  3,616
  4,726
  5,257
  5,815
  6,400
  7,011
  7,648
  8,311
  9,002
  9,720
  10,467
  11,243
  12,050
  12,889
  13,761
  14,668
  15,613
  16,596
  17,620
  18,687
  19,799
Depreciation, amort., depletion, $m
  1,388
  1,519
  1,667
  1,834
  2,019
  2,222
  2,443
  2,681
  2,936
  3,208
  2,667
  2,971
  3,291
  3,626
  3,977
  4,343
  4,724
  5,121
  5,534
  5,963
  6,409
  6,873
  7,355
  7,855
  8,376
  8,917
  9,481
  10,067
  10,678
  11,315
Funds from operations, $m
  1,784
  2,149
  2,564
  3,027
  3,541
  4,103
  4,714
  5,371
  6,075
  6,824
  7,393
  8,229
  9,107
  10,026
  10,988
  11,991
  13,036
  14,123
  15,254
  16,430
  17,653
  18,923
  20,243
  21,616
  23,044
  24,530
  26,076
  27,687
  29,365
  31,114
Change in working capital, $m
  -1,012
  -1,167
  -1,326
  -1,488
  -1,650
  -1,811
  -1,970
  -2,126
  -2,278
  -2,427
  -2,572
  -2,715
  -2,854
  -2,992
  -3,129
  -3,266
  -3,404
  -3,543
  -3,685
  -3,831
  -3,981
  -4,137
  -4,300
  -4,469
  -4,647
  -4,833
  -5,029
  -5,235
  -5,452
  -5,681
Cash from operations, $m
  2,796
  3,316
  3,890
  4,515
  5,191
  5,914
  6,684
  7,497
  8,353
  9,251
  9,965
  10,943
  11,961
  13,019
  14,117
  15,257
  16,439
  17,666
  18,939
  20,261
  21,634
  23,060
  24,543
  26,086
  27,691
  29,363
  31,105
  32,922
  34,817
  36,795
Maintenance CAPEX, $m
  -446
  -559
  -690
  -839
  -1,005
  -1,190
  -1,393
  -1,614
  -1,852
  -2,107
  -2,379
  -2,667
  -2,971
  -3,291
  -3,626
  -3,977
  -4,343
  -4,724
  -5,121
  -5,534
  -5,963
  -6,409
  -6,873
  -7,355
  -7,855
  -8,376
  -8,917
  -9,481
  -10,067
  -10,678
New CAPEX, $m
  -1,540
  -1,778
  -2,020
  -2,267
  -2,514
  -2,759
  -3,001
  -3,239
  -3,471
  -3,698
  -3,919
  -4,136
  -4,349
  -4,559
  -4,768
  -4,976
  -5,186
  -5,398
  -5,615
  -5,837
  -6,066
  -6,304
  -6,551
  -6,810
  -7,080
  -7,364
  -7,662
  -7,976
  -8,307
  -8,657
Cash from investing activities, $m
  -1,986
  -2,337
  -2,710
  -3,106
  -3,519
  -3,949
  -4,394
  -4,853
  -5,323
  -5,805
  -6,298
  -6,803
  -7,320
  -7,850
  -8,394
  -8,953
  -9,529
  -10,122
  -10,736
  -11,371
  -12,029
  -12,713
  -13,424
  -14,165
  -14,935
  -15,740
  -16,579
  -17,457
  -18,374
  -19,335
Free cash flow, $m
  809
  979
  1,179
  1,409
  1,671
  1,964
  2,289
  2,644
  3,030
  3,446
  3,667
  4,140
  4,640
  5,168
  5,723
  6,303
  6,910
  7,543
  8,203
  8,890
  9,604
  10,347
  11,119
  11,921
  12,756
  13,623
  14,526
  15,465
  16,442
  17,461
Issuance/(repayment) of debt, $m
  2,939
  3,398
  3,863
  4,334
  4,806
  5,275
  5,738
  6,192
  6,636
  7,070
  7,493
  7,907
  8,314
  8,716
  9,115
  9,513
  9,914
  10,321
  10,735
  11,160
  11,598
  12,052
  12,525
  13,018
  13,535
  14,078
  14,649
  15,249
  15,882
  16,549
Issuance/(repurchase) of shares, $m
  2,232
  2,407
  2,557
  2,681
  2,775
  2,835
  2,859
  2,845
  2,793
  2,704
  1,973
  1,811
  1,617
  1,392
  1,137
  857
  552
  224
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  5,171
  5,805
  6,420
  7,015
  7,581
  8,110
  8,597
  9,037
  9,429
  9,774
  9,466
  9,718
  9,931
  10,108
  10,252
  10,370
  10,466
  10,545
  10,735
  11,160
  11,598
  12,052
  12,525
  13,018
  13,535
  14,078
  14,649
  15,249
  15,882
  16,549
Total cash flow (excl. dividends), $m
  5,980
  6,784
  7,598
  8,424
  9,252
  10,074
  10,886
  11,681
  12,459
  13,219
  13,132
  13,859
  14,572
  15,276
  15,975
  16,673
  17,376
  18,088
  18,938
  20,049
  21,202
  22,399
  23,644
  24,940
  26,291
  27,701
  29,174
  30,714
  32,324
  34,010
Retained Cash Flow (-), $m
  -2,628
  -3,038
  -3,453
  -3,874
  -4,296
  -4,716
  -5,130
  -5,535
  -5,932
  -6,320
  -6,698
  -7,069
  -7,432
  -7,792
  -8,148
  -8,504
  -8,863
  -9,226
  -9,596
  -9,976
  -10,368
  -10,774
  -11,196
  -11,638
  -12,100
  -12,585
  -13,095
  -13,632
  -14,198
  -14,794
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
  3,352
  3,747
  4,145
  4,550
  4,955
  5,358
  5,756
  6,146
  6,527
  6,899
  6,434
  6,790
  7,139
  7,484
  7,827
  8,169
  8,513
  8,862
  9,342
  10,074
  10,834
  11,625
  12,447
  13,302
  14,191
  15,116
  16,079
  17,082
  18,127
  19,216
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
  3,214
  3,430
  3,608
  3,746
  3,841
  3,889
  3,889
  3,841
  3,749
  3,617
  3,055
  2,897
  2,715
  2,513
  2,298
  2,076
  1,852
  1,632
  1,438
  1,280
  1,121
  965
  816
  678
  552
  441
  345
  264
  198
  145
Current shareholders' claim on cash, %
  97.8
  96.0
  94.4
  93.1
  92.0
  91.0
  90.2
  89.5
  88.9
  88.4
  88.1
  87.8
  87.6
  87.4
  87.3
  87.2
  87.2
  87.2
  87.2
  87.2
  87.2
  87.2
  87.2
  87.2
  87.2
  87.2
  87.2
  87.2
  87.2
  87.2

Salesforce.com, Inc. is a provider of enterprise software, delivered through the cloud, with a focus on customer relationship management (CRM). The Company focuses on cloud, mobile, social, Internet of Things (IoT) and artificial intelligence technologies. The Company's service offerings are configured and integrated with other platforms and enterprise applications. The Company delivers its service offerings via Internet browsers and on mobile devices. Its Customer Success Platform is a portfolio of service offerings providing sales force automation, customer service and support, marketing automation, digital commerce, community management, analytics, application development, IoT integration, collaborative productivity tools and its professional cloud services. Its cloud service offerings include Sales Cloud, Service Cloud, Marketing Cloud, Commerce Cloud, Community Cloud, Analytics Cloud, Salesforce Quip and Salesforce Platform.

FINANCIAL RATIOS  of  Salesforce.com (CRM)

Valuation Ratios
P/E Ratio 538.6
Price to Sales 11.6
Price to Book 12.9
Price to Tangible Book
Price to Cash Flow 44.8
Price to Free Cash Flow 57.1
Growth Rates
Sales Growth Rate 25.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -34.6%
Cap. Spend. - 3 Yr. Gr. Rate 9.2%
Financial Strength
Quick Ratio 110
Current Ratio 0
LT Debt to Equity 35.9%
Total Debt to Equity 36.1%
Interest Coverage 1
Management Effectiveness
Return On Assets 3.8%
Ret/ On Assets - 3 Yr. Avg. 0.3%
Return On Total Capital 2.1%
Ret/ On T. Cap. - 3 Yr. Avg. -1%
Return On Equity 2.9%
Return On Equity - 3 Yr. Avg. -1.9%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 73.4%
Gross Margin - 3 Yr. Avg. 74.9%
EBITDA Margin 8.5%
EBITDA Margin - 3 Yr. Avg. 7.6%
Operating Margin 0.7%
Oper. Margin - 3 Yr. Avg. -0.1%
Pre-Tax Margin 0.3%
Pre-Tax Margin - 3 Yr. Avg. -0.9%
Net Profit Margin 2.1%
Net Profit Margin - 3 Yr. Avg. -1.2%
Effective Tax Rate -620%
Eff/ Tax Rate - 3 Yr. Avg. -156.7%
Payout Ratio 0%

CRM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CRM stock intrinsic value calculation we used $10480.012 million for the last fiscal year's total revenue generated by Salesforce.com. The default revenue input number comes from 0001 income statement of Salesforce.com. 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 CRM stock valuation model: a) initial revenue growth rate of 25.4% 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 CRM is calculated based on our internal credit rating of Salesforce.com, 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 Salesforce.com.
    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 CRM stock the variable cost ratio is equal to 91.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $639 million in the base year in the intrinsic value calculation for CRM 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 Salesforce.com.

Corporate tax rate of 27% is the nominal tax rate for Salesforce.com. 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 CRM 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 CRM are equal to 57.9%.

Life of production assets of 13.6 years is the average useful life of capital assets used in Salesforce.com 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 CRM is equal to -38%. 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 - $10376 million for Salesforce.com - 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 733.9 million for Salesforce.com 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 Salesforce.com at the current share price and the inputted number of shares is $100.6 billion.

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