Intrinsic value of Chevron - CVX

Previous Close

$122.62

  Intrinsic Value

$196.92

stock screener

  Rating & Target

str. buy

+61%

Previous close

$122.62

 
Intrinsic value

$196.92

 
Up/down potential

+61%

 
Rating

str. buy

We calculate the intrinsic value of CVX 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 235.0

 

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, %
  22.50
  20.75
  19.18
  17.76
  16.48
  15.33
  14.30
  13.37
  12.53
  11.78
  11.10
  10.49
  9.94
  9.45
  9.00
  8.60
  8.24
  7.92
  7.63
  7.36
  7.13
  6.91
  6.72
  6.55
  6.40
  6.26
  6.13
  6.02
  5.92
  5.82
Revenue, $m
  173,609
  209,633
  249,831
  294,194
  342,683
  395,228
  451,747
  512,146
  576,334
  644,226
  715,747
  790,841
  869,470
  951,620
  1,037,298
  1,126,538
  1,219,396
  1,315,954
  1,416,318
  1,520,615
  1,628,998
  1,741,641
  1,858,737
  1,980,503
  2,107,175
  2,239,006
  2,376,273
  2,519,268
  2,668,304
  2,823,714
Variable operating expenses, $m
  100,244
  120,951
  144,056
  169,557
  197,428
  227,631
  260,118
  294,836
  331,732
  370,756
  411,413
  454,577
  499,774
  546,994
  596,242
  647,537
  700,913
  756,414
  814,103
  874,054
  936,353
  1,001,100
  1,068,408
  1,138,399
  1,211,210
  1,286,987
  1,365,889
  1,448,083
  1,533,749
  1,623,079
Fixed operating expenses, $m
  52,448
  53,602
  54,781
  55,986
  57,218
  58,477
  59,763
  61,078
  62,422
  63,795
  65,199
  66,633
  68,099
  69,597
  71,128
  72,693
  74,292
  75,927
  77,597
  79,304
  81,049
  82,832
  84,654
  86,517
  88,420
  90,365
  92,353
  94,385
  96,462
  98,584
Total operating expenses, $m
  152,692
  174,553
  198,837
  225,543
  254,646
  286,108
  319,881
  355,914
  394,154
  434,551
  476,612
  521,210
  567,873
  616,591
  667,370
  720,230
  775,205
  832,341
  891,700
  953,358
  1,017,402
  1,083,932
  1,153,062
  1,224,916
  1,299,630
  1,377,352
  1,458,242
  1,542,468
  1,630,211
  1,721,663
Operating income, $m
  20,917
  35,081
  50,993
  68,651
  88,037
  109,120
  131,865
  156,232
  182,181
  209,675
  239,135
  269,630
  301,597
  335,029
  369,928
  406,308
  444,192
  483,613
  524,617
  567,257
  611,596
  657,709
  705,675
  755,588
  807,545
  861,654
  918,031
  976,800
  1,038,094
  1,102,051
EBITDA, $m
  44,871
  63,911
  85,265
  108,929
  134,878
  163,074
  193,470
  226,013
  260,651
  297,336
  336,024
  376,685
  419,296
  463,848
  510,346
  558,805
  609,259
  661,752
  716,342
  773,100
  832,111
  893,472
  957,290
  1,023,685
  1,092,790
  1,164,745
  1,239,703
  1,317,830
  1,399,298
  1,484,293
Interest expense (income), $m
  158
  2,093
  3,376
  4,826
  6,444
  8,230
  10,182
  12,297
  14,573
  17,004
  19,588
  22,322
  25,201
  28,224
  31,390
  34,697
  38,146
  41,739
  45,477
  49,364
  53,405
  57,603
  61,967
  66,501
  71,216
  76,118
  81,217
  86,524
  92,051
  97,807
  103,807
Earnings before tax, $m
  18,824
  31,705
  46,167
  62,207
  79,807
  98,938
  119,567
  141,659
  165,176
  190,086
  216,813
  244,429
  273,373
  303,639
  335,231
  368,162
  402,453
  438,136
  475,253
  513,852
  553,993
  595,742
  639,174
  684,372
  731,427
  780,437
  831,507
  884,750
  940,287
  998,244
Tax expense, $m
  5,082
  8,560
  12,465
  16,796
  21,548
  26,713
  32,283
  38,248
  44,598
  51,323
  58,540
  65,996
  73,811
  81,983
  90,512
  99,404
  108,662
  118,297
  128,318
  138,740
  149,578
  160,850
  172,577
  184,780
  197,485
  210,718
  224,507
  238,882
  253,877
  269,526
Net income, $m
  13,741
  23,145
  33,702
  45,411
  58,259
  72,225
  87,284
  103,411
  120,579
  138,763
  158,274
  178,433
  199,562
  221,657
  244,719
  268,758
  293,791
  319,840
  346,935
  375,112
  404,415
  434,892
  466,597
  499,592
  533,942
  569,719
  607,000
  645,867
  686,409
  728,718

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
  311,128
  375,687
  447,725
  527,230
  614,127
  708,294
  809,582
  917,824
  1,032,857
  1,154,526
  1,282,700
  1,417,277
  1,558,190
  1,705,412
  1,858,958
  2,018,886
  2,185,298
  2,358,341
  2,538,203
  2,725,117
  2,919,352
  3,121,220
  3,331,071
  3,549,289
  3,776,299
  4,012,556
  4,258,554
  4,514,817
  4,781,907
  5,060,419
Adjusted assets (=assets-cash), $m
  311,128
  375,687
  447,725
  527,230
  614,127
  708,294
  809,582
  917,824
  1,032,857
  1,154,526
  1,282,700
  1,417,277
  1,558,190
  1,705,412
  1,858,958
  2,018,886
  2,185,298
  2,358,341
  2,538,203
  2,725,117
  2,919,352
  3,121,220
  3,331,071
  3,549,289
  3,776,299
  4,012,556
  4,258,554
  4,514,817
  4,781,907
  5,060,419
Revenue / Adjusted assets
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
  0.558
Average production assets, $m
  223,262
  269,589
  321,282
  378,334
  440,690
  508,263
  580,946
  658,620
  741,166
  828,474
  920,450
  1,017,021
  1,118,138
  1,223,783
  1,333,966
  1,448,728
  1,568,144
  1,692,317
  1,821,384
  1,955,511
  2,094,892
  2,239,750
  2,390,336
  2,546,927
  2,709,827
  2,879,362
  3,055,887
  3,239,779
  3,431,439
  3,631,296
Working capital, $m
  1,389
  1,677
  1,999
  2,354
  2,741
  3,162
  3,614
  4,097
  4,611
  5,154
  5,726
  6,327
  6,956
  7,613
  8,298
  9,012
  9,755
  10,528
  11,331
  12,165
  13,032
  13,933
  14,870
  15,844
  16,857
  17,912
  19,010
  20,154
  21,346
  22,590
Total debt, $m
  62,510
  89,367
  119,335
  152,409
  188,558
  227,731
  269,867
  314,896
  362,750
  413,364
  466,684
  522,668
  581,288
  642,532
  706,407
  772,937
  842,165
  914,151
  988,974
  1,066,729
  1,147,531
  1,231,509
  1,318,806
  1,409,585
  1,504,021
  1,602,304
  1,704,639
  1,811,245
  1,922,354
  2,038,215
Total liabilities, $m
  129,429
  156,286
  186,254
  219,328
  255,477
  294,650
  336,786
  381,815
  429,669
  480,283
  533,603
  589,587
  648,207
  709,451
  773,326
  839,856
  909,084
  981,070
  1,055,893
  1,133,648
  1,214,450
  1,298,428
  1,385,725
  1,476,504
  1,570,940
  1,669,223
  1,771,558
  1,878,164
  1,989,273
  2,105,134
Total equity, $m
  181,699
  219,401
  261,471
  307,902
  358,650
  413,644
  472,796
  536,009
  603,189
  674,243
  749,097
  827,690
  909,983
  995,961
  1,085,631
  1,179,029
  1,276,214
  1,377,271
  1,482,311
  1,591,468
  1,704,901
  1,822,792
  1,945,345
  2,072,785
  2,205,359
  2,343,333
  2,486,995
  2,636,653
  2,792,634
  2,955,285
Total liabilities and equity, $m
  311,128
  375,687
  447,725
  527,230
  614,127
  708,294
  809,582
  917,824
  1,032,858
  1,154,526
  1,282,700
  1,417,277
  1,558,190
  1,705,412
  1,858,957
  2,018,885
  2,185,298
  2,358,341
  2,538,204
  2,725,116
  2,919,351
  3,121,220
  3,331,070
  3,549,289
  3,776,299
  4,012,556
  4,258,553
  4,514,817
  4,781,907
  5,060,419
Debt-to-equity ratio
  0.340
  0.410
  0.460
  0.490
  0.530
  0.550
  0.570
  0.590
  0.600
  0.610
  0.620
  0.630
  0.640
  0.650
  0.650
  0.660
  0.660
  0.660
  0.670
  0.670
  0.670
  0.680
  0.680
  0.680
  0.680
  0.680
  0.690
  0.690
  0.690
  0.690
Adjusted equity ratio
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584
  0.584

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  13,741
  23,145
  33,702
  45,411
  58,259
  72,225
  87,284
  103,411
  120,579
  138,763
  158,274
  178,433
  199,562
  221,657
  244,719
  268,758
  293,791
  319,840
  346,935
  375,112
  404,415
  434,892
  466,597
  499,592
  533,942
  569,719
  607,000
  645,867
  686,409
  728,718
Depreciation, amort., depletion, $m
  23,954
  28,831
  34,272
  40,278
  46,842
  53,955
  61,605
  69,782
  78,471
  87,661
  96,889
  107,055
  117,699
  128,819
  140,417
  152,498
  165,068
  178,139
  191,725
  205,843
  220,515
  235,763
  251,614
  268,098
  285,245
  303,091
  321,672
  341,029
  361,204
  382,242
Funds from operations, $m
  37,696
  51,975
  67,974
  85,689
  105,100
  126,179
  148,890
  173,193
  199,049
  226,424
  255,163
  285,488
  317,261
  350,476
  385,136
  421,256
  458,858
  497,978
  538,659
  580,955
  624,930
  670,655
  718,211
  767,689
  819,187
  872,809
  928,672
  986,897
  1,047,613
  1,110,960
Change in working capital, $m
  255
  288
  322
  355
  388
  420
  452
  483
  514
  543
  572
  601
  629
  657
  685
  714
  743
  772
  803
  834
  867
  901
  937
  974
  1,013
  1,055
  1,098
  1,144
  1,192
  1,243
Cash from operations, $m
  37,441
  51,687
  67,653
  85,334
  104,712
  125,759
  148,437
  172,709
  198,536
  225,881
  254,591
  284,887
  316,632
  349,819
  384,451
  420,542
  458,116
  497,206
  537,856
  580,121
  624,063
  669,754
  717,275
  766,715
  818,173
  871,755
  927,574
  985,753
  1,046,421
  1,109,717
Maintenance CAPEX, $m
  -19,182
  -23,501
  -28,378
  -33,819
  -39,825
  -46,388
  -53,501
  -61,152
  -69,328
  -78,017
  -87,208
  -96,889
  -107,055
  -117,699
  -128,819
  -140,417
  -152,498
  -165,068
  -178,139
  -191,725
  -205,843
  -220,515
  -235,763
  -251,614
  -268,098
  -285,245
  -303,091
  -321,672
  -341,029
  -361,204
New CAPEX, $m
  -41,035
  -46,327
  -51,694
  -57,052
  -62,356
  -67,574
  -72,683
  -77,674
  -82,546
  -87,308
  -91,976
  -96,571
  -101,117
  -105,645
  -110,183
  -114,762
  -119,416
  -124,174
  -129,067
  -134,127
  -139,381
  -144,858
  -150,586
  -156,591
  -162,899
  -169,535
  -176,525
  -183,892
  -191,661
  -199,856
Cash from investing activities, $m
  -60,217
  -69,828
  -80,072
  -90,871
  -102,181
  -113,962
  -126,184
  -138,826
  -151,874
  -165,325
  -179,184
  -193,460
  -208,172
  -223,344
  -239,002
  -255,179
  -271,914
  -289,242
  -307,206
  -325,852
  -345,224
  -365,373
  -386,349
  -408,205
  -430,997
  -454,780
  -479,616
  -505,564
  -532,690
  -561,060
Free cash flow, $m
  -22,776
  -18,141
  -12,419
  -5,537
  2,532
  11,797
  22,253
  33,884
  46,661
  60,555
  75,407
  91,427
  108,460
  126,475
  145,449
  165,362
  186,202
  207,964
  230,651
  254,270
  278,839
  304,380
  330,925
  358,510
  387,176
  416,974
  447,959
  480,189
  513,731
  548,656
Issuance/(repayment) of debt, $m
  23,747
  26,857
  29,968
  33,074
  36,149
  39,174
  42,136
  45,029
  47,854
  50,614
  53,320
  55,984
  58,620
  61,244
  63,875
  66,530
  69,228
  71,986
  74,823
  77,756
  80,802
  83,977
  87,298
  90,779
  94,436
  98,283
  102,335
  106,606
  111,110
  115,861
Issuance/(repurchase) of shares, $m
  19,833
  14,558
  8,368
  1,020
  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  
  43,580
  41,415
  38,336
  34,094
  36,149
  39,174
  42,136
  45,029
  47,854
  50,614
  53,320
  55,984
  58,620
  61,244
  63,875
  66,530
  69,228
  71,986
  74,823
  77,756
  80,802
  83,977
  87,298
  90,779
  94,436
  98,283
  102,335
  106,606
  111,110
  115,861
Total cash flow (excl. dividends), $m
  20,805
  23,274
  25,917
  28,557
  38,681
  50,971
  64,389
  78,912
  94,515
  111,169
  128,727
  147,411
  167,080
  187,720
  209,324
  231,892
  255,430
  279,950
  305,473
  332,026
  359,641
  388,358
  418,223
  449,289
  481,612
  515,258
  550,293
  586,794
  624,840
  664,517
Retained Cash Flow (-), $m
  -33,575
  -37,702
  -42,070
  -46,431
  -50,748
  -54,994
  -59,152
  -63,214
  -67,179
  -71,055
  -74,854
  -78,593
  -82,293
  -85,978
  -89,671
  -93,398
  -97,185
  -101,057
  -105,040
  -109,157
  -113,433
  -117,891
  -122,553
  -127,440
  -132,574
  -137,974
  -143,662
  -149,658
  -155,981
  -162,651
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
  -12,770
  -14,429
  -16,153
  -17,874
  -12,067
  -4,023
  5,237
  15,699
  27,336
  40,115
  53,874
  68,818
  84,786
  101,742
  119,653
  138,494
  158,245
  178,893
  200,434
  222,868
  246,207
  270,467
  295,670
  321,849
  349,039
  377,283
  406,631
  437,137
  468,860
  501,866
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
  -12,244
  -13,209
  -14,057
  -14,717
  -9,353
  -2,920
  3,538
  9,812
  15,703
  21,031
  25,584
  29,367
  32,237
  34,157
  35,128
  35,194
  34,432
  32,945
  30,861
  28,320
  25,466
  22,442
  19,379
  16,392
  13,578
  11,007
  8,727
  6,763
  5,118
  3,779
Current shareholders' claim on cash, %
  92.2
  87.8
  85.7
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5
  85.5

Chevron Corporation (Chevron) manages its investments in subsidiaries and affiliates, and provides administrative, financial, management and technology support to the United States and international subsidiaries that engage in integrated energy and chemicals operations. The Company operates through two business segments: Upstream and Downstream. Upstream operations consist primarily of exploring for, developing and producing crude oil and natural gas; liquefaction, transportation and regasification associated with liquefied natural gas; transporting crude oil by international oil export pipelines; processing, transporting, storage and marketing of natural gas, and a gas-to-liquids plant. Downstream operations consist primarily of refining of crude oil into petroleum products; marketing of crude oil and refined products; transporting of crude oil and refined products, and manufacturing and marketing of commodity petrochemicals.

FINANCIAL RATIOS  of  Chevron (CVX)

Valuation Ratios
P/E Ratio -466.7
Price to Sales 2.1
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 18.1
Price to Free Cash Flow -44.1
Growth Rates
Sales Growth Rate -14.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -38.6%
Cap. Spend. - 3 Yr. Gr. Rate -13.8%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 24.2%
Total Debt to Equity 31.7%
Interest Coverage -13
Management Effectiveness
Return On Assets -0.2%
Ret/ On Assets - 3 Yr. Avg. 3%
Return On Total Capital -0.3%
Ret/ On T. Cap. - 3 Yr. Avg. 4.4%
Return On Equity -0.3%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 46.3%
Gross Margin - 3 Yr. Avg. 42.9%
EBITDA Margin 15.8%
EBITDA Margin - 3 Yr. Avg. 19.9%
Operating Margin -3.9%
Oper. Margin - 3 Yr. Avg. 2.6%
Pre-Tax Margin -2%
Pre-Tax Margin - 3 Yr. Avg. 5.8%
Net Profit Margin -0.4%
Net Profit Margin - 3 Yr. Avg. 4.2%
Effective Tax Rate 80%
Eff/ Tax Rate - 3 Yr. Avg. 40.3%
Payout Ratio -1616.1%

CVX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CVX stock intrinsic value calculation we used $141722 million for the last fiscal year's total revenue generated by Chevron. The default revenue input number comes from 0001 income statement of Chevron. 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 CVX stock valuation model: a) initial revenue growth rate of 22.5% 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 CVX is calculated based on our internal credit rating of Chevron, 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 Chevron.
    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 CVX stock the variable cost ratio is equal to 57.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $51319 million in the base year in the intrinsic value calculation for CVX 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 Chevron.

Corporate tax rate of 27% is the nominal tax rate for Chevron. 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 CVX 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 CVX are equal to 128.6%.

Life of production assets of 9.5 years is the average useful life of capital assets used in Chevron 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 CVX is equal to 0.8%. 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 - $148124 million for Chevron - 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 1916.15 million for Chevron 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 Chevron at the current share price and the inputted number of shares is $235.0 billion.

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