Intrinsic value of Caesars Entertainment - CZR

Previous Close

$8.18

  Intrinsic Value

$0.00

stock screener

  Rating & Target

str. sell

-100%

Previous close

$8.18

 
Intrinsic value

$0.00

 
Up/down potential

-100%

 
Rating

str. sell

We calculate the intrinsic value of CZR 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 1.2

 

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, %
  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
  7,763
  11,994
  17,937
  26,026
  36,719
  50,480
  67,759
  88,972
  114,485
  144,604
  179,566
  219,536
  264,615
  314,840
  370,195
  430,626
  496,045
  566,347
  641,417
  721,144
  805,422
  894,163
  987,302
  1,084,794
  1,186,625
  1,292,810
  1,403,391
  1,518,445
  1,638,074
  1,762,413
Variable operating expenses, $m
  18,454
  28,215
  41,927
  60,590
  85,261
  117,011
  156,877
  205,820
  264,684
  334,175
  414,296
  506,516
  610,523
  726,401
  854,119
  993,546
  1,144,481
  1,306,682
  1,479,886
  1,663,831
  1,858,278
  2,063,024
  2,277,913
  2,502,848
  2,737,795
  2,982,784
  3,237,920
  3,503,372
  3,779,382
  4,066,259
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
  18,454
  28,215
  41,927
  60,590
  85,261
  117,011
  156,877
  205,820
  264,684
  334,175
  414,296
  506,516
  610,523
  726,401
  854,119
  993,546
  1,144,481
  1,306,682
  1,479,886
  1,663,831
  1,858,278
  2,063,024
  2,277,913
  2,502,848
  2,737,795
  2,982,784
  3,237,920
  3,503,372
  3,779,382
  4,066,259
Operating income, $m
  -10,691
  -16,221
  -23,990
  -34,564
  -48,542
  -66,531
  -89,118
  -116,848
  -150,199
  -189,571
  -234,730
  -286,980
  -345,908
  -411,562
  -483,924
  -562,919
  -648,436
  -740,335
  -838,468
  -942,687
  -1,052,856
  -1,168,860
  -1,290,612
  -1,418,054
  -1,551,169
  -1,689,975
  -1,834,528
  -1,984,927
  -2,141,308
  -2,303,846
EBITDA, $m
  -9,263
  -14,311
  -21,402
  -31,053
  -43,812
  -60,231
  -80,848
  -106,158
  -136,600
  -172,536
  -214,251
  -261,942
  -315,729
  -375,655
  -441,703
  -513,807
  -591,863
  -675,744
  -765,315
  -860,442
  -960,999
  -1,066,882
  -1,178,011
  -1,294,335
  -1,415,837
  -1,542,532
  -1,674,474
  -1,811,751
  -1,954,488
  -2,102,845
Interest expense (income), $m
  634
  1,133
  1,948
  3,141
  4,816
  7,095
  10,109
  13,987
  18,856
  24,835
  32,025
  40,513
  50,366
  61,630
  74,334
  88,488
  104,088
  121,119
  139,555
  159,368
  180,524
  202,992
  226,743
  251,752
  278,000
  305,475
  334,173
  364,098
  395,262
  427,686
  461,400
Earnings before tax, $m
  -11,824
  -18,170
  -27,131
  -39,380
  -55,637
  -76,639
  -103,105
  -135,704
  -175,033
  -221,595
  -275,243
  -337,346
  -407,538
  -485,896
  -572,412
  -667,008
  -769,555
  -879,890
  -997,836
  -1,123,211
  -1,255,848
  -1,395,603
  -1,542,364
  -1,696,055
  -1,856,645
  -2,024,148
  -2,198,626
  -2,380,189
  -2,568,994
  -2,765,245
Tax expense, $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
Net income, $m
  -11,824
  -18,170
  -27,131
  -39,380
  -55,637
  -76,639
  -103,105
  -135,704
  -175,033
  -221,595
  -275,243
  -337,346
  -407,538
  -485,896
  -572,412
  -667,008
  -769,555
  -879,890
  -997,836
  -1,123,211
  -1,255,848
  -1,395,603
  -1,542,364
  -1,696,055
  -1,856,645
  -2,024,148
  -2,198,626
  -2,380,189
  -2,568,994
  -2,765,245

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
  39,208
  60,576
  90,592
  131,445
  185,449
  254,950
  342,218
  449,353
  578,209
  730,324
  906,897
  1,108,769
  1,336,439
  1,590,099
  1,869,674
  2,174,880
  2,505,279
  2,860,339
  3,239,482
  3,642,140
  4,067,786
  4,515,977
  4,986,372
  5,478,757
  5,993,056
  6,529,341
  7,087,834
  7,668,912
  8,273,100
  8,901,076
Adjusted assets (=assets-cash), $m
  39,208
  60,576
  90,592
  131,445
  185,449
  254,950
  342,218
  449,353
  578,209
  730,324
  906,897
  1,108,769
  1,336,439
  1,590,099
  1,869,674
  2,174,880
  2,505,279
  2,860,339
  3,239,482
  3,642,140
  4,067,786
  4,515,977
  4,986,372
  5,478,757
  5,993,056
  6,529,341
  7,087,834
  7,668,912
  8,273,100
  8,901,076
Revenue / Adjusted assets
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
  0.198
Average production assets, $m
  21,869
  33,788
  50,529
  73,315
  103,437
  142,203
  190,877
  250,634
  322,505
  407,350
  505,837
  618,434
  745,420
  886,903
  1,042,841
  1,213,074
  1,397,360
  1,595,400
  1,806,873
  2,031,462
  2,268,873
  2,518,858
  2,781,229
  3,055,864
  3,342,723
  3,641,844
  3,953,353
  4,277,458
  4,614,454
  4,964,717
Working capital, $m
  -1,700
  -2,627
  -3,928
  -5,700
  -8,041
  -11,055
  -14,839
  -19,485
  -25,072
  -31,668
  -39,325
  -48,078
  -57,951
  -68,950
  -81,073
  -94,307
  -108,634
  -124,030
  -140,470
  -157,930
  -176,387
  -195,822
  -216,219
  -237,570
  -259,871
  -283,125
  -307,343
  -332,539
  -358,738
  -385,968
Total debt, $m
  31,427
  50,659
  77,673
  114,440
  163,044
  225,595
  304,136
  400,558
  516,528
  653,432
  812,348
  994,032
  1,198,935
  1,427,229
  1,678,847
  1,953,532
  2,250,891
  2,570,445
  2,911,674
  3,274,066
  3,657,148
  4,060,519
  4,483,874
  4,927,021
  5,389,890
  5,872,547
  6,375,191
  6,898,161
  7,441,930
  8,007,108
Total liabilities, $m
  35,287
  54,519
  81,533
  118,300
  166,904
  229,455
  307,996
  404,418
  520,388
  657,292
  816,208
  997,892
  1,202,795
  1,431,089
  1,682,707
  1,957,392
  2,254,751
  2,574,305
  2,915,534
  3,277,926
  3,661,008
  4,064,379
  4,487,734
  4,930,881
  5,393,750
  5,876,407
  6,379,051
  6,902,021
  7,445,790
  8,010,968
Total equity, $m
  3,921
  6,058
  9,059
  13,144
  18,545
  25,495
  34,222
  44,935
  57,821
  73,032
  90,690
  110,877
  133,644
  159,010
  186,967
  217,488
  250,528
  286,034
  323,948
  364,214
  406,779
  451,598
  498,637
  547,876
  599,306
  652,934
  708,783
  766,891
  827,310
  890,108
Total liabilities and equity, $m
  39,208
  60,577
  90,592
  131,444
  185,449
  254,950
  342,218
  449,353
  578,209
  730,324
  906,898
  1,108,769
  1,336,439
  1,590,099
  1,869,674
  2,174,880
  2,505,279
  2,860,339
  3,239,482
  3,642,140
  4,067,787
  4,515,977
  4,986,371
  5,478,757
  5,993,056
  6,529,341
  7,087,834
  7,668,912
  8,273,100
  8,901,076
Debt-to-equity ratio
  8.020
  8.360
  8.570
  8.710
  8.790
  8.850
  8.890
  8.910
  8.930
  8.950
  8.960
  8.970
  8.970
  8.980
  8.980
  8.980
  8.980
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  8.990
  9.000
  9.000
Adjusted equity ratio
  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
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -11,824
  -18,170
  -27,131
  -39,380
  -55,637
  -76,639
  -103,105
  -135,704
  -175,033
  -221,595
  -275,243
  -337,346
  -407,538
  -485,896
  -572,412
  -667,008
  -769,555
  -879,890
  -997,836
  -1,123,211
  -1,255,848
  -1,395,603
  -1,542,364
  -1,696,055
  -1,856,645
  -2,024,148
  -2,198,626
  -2,380,189
  -2,568,994
  -2,765,245
Depreciation, amort., depletion, $m
  1,428
  1,910
  2,588
  3,511
  4,730
  6,300
  8,270
  10,690
  13,599
  17,034
  20,479
  25,038
  30,179
  35,907
  42,220
  49,112
  56,573
  64,591
  73,153
  82,245
  91,857
  101,978
  112,600
  123,719
  135,333
  147,443
  160,055
  173,176
  186,820
  201,001
Funds from operations, $m
  -10,396
  -16,259
  -24,543
  -35,869
  -50,907
  -70,340
  -94,835
  -125,014
  -161,434
  -204,561
  -254,764
  -312,308
  -377,359
  -449,989
  -530,192
  -617,896
  -712,982
  -815,299
  -924,683
  -1,040,965
  -1,163,991
  -1,293,625
  -1,429,763
  -1,572,335
  -1,721,312
  -1,876,705
  -2,038,572
  -2,207,013
  -2,382,174
  -2,564,245
Change in working capital, $m
  -638
  -927
  -1,302
  -1,771
  -2,342
  -3,014
  -3,784
  -4,646
  -5,587
  -6,596
  -7,657
  -8,754
  -9,872
  -10,999
  -12,123
  -13,234
  -14,327
  -15,396
  -16,440
  -17,460
  -18,457
  -19,434
  -20,397
  -21,351
  -22,301
  -23,254
  -24,217
  -25,197
  -26,199
  -27,230
Cash from operations, $m
  -9,758
  -15,333
  -23,241
  -34,098
  -48,565
  -67,326
  -91,050
  -120,369
  -155,847
  -197,965
  -247,107
  -303,554
  -367,486
  -438,990
  -518,069
  -604,661
  -698,655
  -799,903
  -908,242
  -1,023,505
  -1,145,534
  -1,274,191
  -1,409,366
  -1,550,985
  -1,699,011
  -1,853,451
  -2,014,354
  -2,181,816
  -2,355,975
  -2,537,014
Maintenance CAPEX, $m
  -553
  -885
  -1,368
  -2,046
  -2,968
  -4,188
  -5,757
  -7,728
  -10,147
  -13,057
  -16,492
  -20,479
  -25,038
  -30,179
  -35,907
  -42,220
  -49,112
  -56,573
  -64,591
  -73,153
  -82,245
  -91,857
  -101,978
  -112,600
  -123,719
  -135,333
  -147,443
  -160,055
  -173,176
  -186,820
New CAPEX, $m
  -8,203
  -11,919
  -16,742
  -22,786
  -30,122
  -38,765
  -48,675
  -59,757
  -71,871
  -84,845
  -98,486
  -112,597
  -126,987
  -141,483
  -155,937
  -170,233
  -184,285
  -198,040
  -211,473
  -224,589
  -237,411
  -249,985
  -262,370
  -274,636
  -286,859
  -299,122
  -311,509
  -324,105
  -336,996
  -350,263
Cash from investing activities, $m
  -8,756
  -12,804
  -18,110
  -24,832
  -33,090
  -42,953
  -54,432
  -67,485
  -82,018
  -97,902
  -114,978
  -133,076
  -152,025
  -171,662
  -191,844
  -212,453
  -233,397
  -254,613
  -276,064
  -297,742
  -319,656
  -341,842
  -364,348
  -387,236
  -410,578
  -434,455
  -458,952
  -484,160
  -510,172
  -537,083
Free cash flow, $m
  -18,514
  -28,137
  -41,351
  -58,929
  -81,655
  -110,279
  -145,482
  -187,853
  -237,865
  -295,867
  -362,085
  -436,631
  -519,511
  -610,651
  -709,913
  -817,115
  -932,053
  -1,054,517
  -1,184,307
  -1,321,247
  -1,465,191
  -1,616,034
  -1,773,714
  -1,938,221
  -2,109,589
  -2,287,905
  -2,473,306
  -2,665,976
  -2,866,148
  -3,074,098
Issuance/(repayment) of debt, $m
  13,150
  19,232
  27,014
  36,767
  48,604
  62,551
  78,541
  96,422
  115,970
  136,904
  158,916
  181,684
  204,903
  228,294
  251,617
  274,685
  297,359
  319,553
  341,229
  362,392
  383,082
  403,371
  423,355
  443,147
  462,869
  482,656
  502,644
  522,970
  543,770
  565,178
Issuance/(repurchase) of shares, $m
  13,344
  20,307
  30,133
  43,465
  61,038
  83,589
  111,831
  146,418
  187,919
  236,807
  292,900
  357,533
  430,305
  511,262
  600,369
  697,528
  802,595
  915,396
  1,035,750
  1,163,476
  1,298,413
  1,440,422
  1,589,403
  1,745,293
  1,908,075
  2,077,777
  2,254,476
  2,438,297
  2,629,413
  2,828,043
Cash from financing (excl. dividends), $m  
  26,494
  39,539
  57,147
  80,232
  109,642
  146,140
  190,372
  242,840
  303,889
  373,711
  451,816
  539,217
  635,208
  739,556
  851,986
  972,213
  1,099,954
  1,234,949
  1,376,979
  1,525,868
  1,681,495
  1,843,793
  2,012,758
  2,188,440
  2,370,944
  2,560,433
  2,757,120
  2,961,267
  3,173,183
  3,393,221
Total cash flow (excl. dividends), $m
  7,979
  11,401
  15,796
  21,303
  27,986
  35,861
  44,890
  54,986
  66,024
  77,844
  89,730
  102,587
  115,697
  128,904
  142,074
  155,099
  167,902
  180,433
  192,672
  204,621
  216,304
  227,760
  239,044
  250,219
  261,355
  272,528
  283,814
  295,291
  307,035
  319,123
Retained Cash Flow (-), $m
  -13,344
  -20,307
  -30,133
  -43,465
  -61,038
  -83,589
  -111,831
  -146,418
  -187,919
  -236,807
  -292,900
  -357,533
  -430,305
  -511,262
  -600,369
  -697,528
  -802,595
  -915,396
  -1,035,750
  -1,163,476
  -1,298,413
  -1,440,422
  -1,589,403
  -1,745,293
  -1,908,075
  -2,077,777
  -2,254,476
  -2,438,297
  -2,629,413
  -2,828,043
Prev. year cash balance distribution, $m
  825
  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
  -4,539
  -8,905
  -14,337
  -22,162
  -33,051
  -47,728
  -66,942
  -91,431
  -121,895
  -158,963
  -203,170
  -254,946
  -314,608
  -382,358
  -458,296
  -542,430
  -634,693
  -734,963
  -843,078
  -958,855
  -1,082,109
  -1,212,662
  -1,350,359
  -1,495,074
  -1,646,719
  -1,805,249
  -1,970,662
  -2,143,007
  -2,322,378
  -2,508,920
Discount rate, %
  12.00
  12.60
  13.23
  13.89
  14.59
  15.32
  16.08
  16.89
  17.73
  18.62
  19.55
  20.52
  21.55
  22.63
  23.76
  24.95
  26.19
  27.50
  28.88
  30.32
  31.84
  33.43
  35.10
  36.86
  38.70
  40.64
  42.67
  44.80
  47.04
  49.39
PV of cash for distribution, $m
  -4,053
  -7,024
  -9,876
  -13,172
  -16,731
  -20,298
  -23,570
  -26,243
  -28,056
  -28,831
  -28,507
  -27,137
  -24,885
  -21,990
  -18,728
  -15,372
  -12,158
  -9,265
  -6,798
  -4,801
  -3,261
  -2,128
  -1,334
  -802
  -462
  -255
  -134
  -68
  -32
  -15
Current shareholders' claim on cash, %
  11.2
  1.3
  0.2
  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
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Caesars Entertainment Corporation is a holding company. The Company provides casino-entertainment and hospitality services. The Company's segments include Caesars Entertainment Resort Properties, LLC (CERP), Caesars Growth Partners, LLC (CGP) and Other. The Company's resorts operate primarily under the Harrah's, Caesars and Horseshoe brand names. The Company also owns the London clubs international family of casinos. The Company's facilities include gaming offerings, food and beverage outlets, hotel and convention space, and non-gaming entertainment options. As of July 14, 2017, the Company through its subsidiaries, operates 47 casinos in 13 states and five countries. As of December 31, 2016, CERP owned six casinos in the United States and The LINQ promenade along with leasing Octavius Tower at Caesars Palace Las Vegas (Octavius Tower) to Caesars Entertainment Operating Company (CEOC) and gaming space at The LINQ promenade to CGP.

FINANCIAL RATIOS  of  Caesars Entertainment (CZR)

Valuation Ratios
P/E Ratio -0.3
Price to Sales 0.3
Price to Book -0.4
Price to Tangible Book
Price to Cash Flow 2
Price to Free Cash Flow 3.3
Growth Rates
Sales Growth Rate -1.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -35.5%
Cap. Spend. - 3 Yr. Gr. Rate -21.2%
Financial Strength
Quick Ratio 17
Current Ratio 0.4
LT Debt to Equity -212.4%
Total Debt to Equity -215.2%
Interest Coverage -9
Management Effectiveness
Return On Assets -21.6%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital -61.5%
Ret/ On T. Cap. - 3 Yr. Avg. -10.4%
Return On Equity 325.9%
Return On Equity - 3 Yr. Avg. 33.1%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 54.6%
Gross Margin - 3 Yr. Avg. 51.6%
EBITDA Margin -129.7%
EBITDA Margin - 3 Yr. Avg. 12.4%
Operating Margin -141.9%
Oper. Margin - 3 Yr. Avg. 4.8%
Pre-Tax Margin -157.3%
Pre-Tax Margin - 3 Yr. Avg. -17.3%
Net Profit Margin -92.1%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate -0.4%
Eff/ Tax Rate - 3 Yr. Avg. 5.2%
Payout Ratio 0%

CZR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CZR stock intrinsic value calculation we used $4852 million for the last fiscal year's total revenue generated by Caesars Entertainment. The default revenue input number comes from 0001 income statement of Caesars Entertainment. 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 CZR 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 12%, whose default value for CZR is calculated based on our internal credit rating of Caesars Entertainment, 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 Caesars Entertainment.
    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 CZR stock the variable cost ratio is equal to 241.9%.

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 CZR 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 6.2% for Caesars Entertainment.

Corporate tax rate of 27% is the nominal tax rate for Caesars Entertainment. 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 CZR 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 CZR are equal to 281.7%.

Life of production assets of 24.7 years is the average useful life of capital assets used in Caesars Entertainment 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 CZR is equal to -21.9%. 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 - $3226 million for Caesars Entertainment - 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 146.963 million for Caesars Entertainment 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 Caesars Entertainment at the current share price and the inputted number of shares is $1.2 billion.

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COMPANY NEWS

▶ Major portions of Harrahs Ak-Chin Casino Resort expansion completed   [Nov-09-18 04:26PM  American City Business Journals]
▶ Its official: Caesars rejects Tilman Fertittas offer to merge with Golden Nugget   [Nov-02-18 07:04PM  American City Business Journals]
▶ Casino giant Caesars Entertainment's CEO to step down   [Nov-01-18 08:52PM  Associated Press]
▶ [$$] TPG hits lull in Europe after deals sour   [12:00AM  Financial Times]
▶ Caesars announces new partnership with 76ers, Devils   [12:12PM  Fox Business Videos]
▶ Owner of Sixers and Devils, Caesars Entertainment sign sponsorship deal   [08:12AM  American City Business Journals]
▶ Las Vegas Sands Misses As U.S. Casinos Weaken; Dividend Hiked   [Oct-24-18 04:27PM  Investor's Business Daily]
▶ Why Caesars Stock Is Worth the Gamble   [07:00AM  InvestorPlace]
▶ Tilman Fertitta reportedly proposes merging Caesars, Golden Nugget casinos   [Oct-17-18 06:46PM  American City Business Journals]
▶ 5 Top Stock Trades for Thursday   [03:56PM  InvestorPlace]
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▶ Employees can choose salaries but only if co-workers approve   [Sep-25-18 02:02PM  Yahoo Finance Video]
▶ Why Caesars Entertainment Has Recovery Potential   [Sep-19-18 03:27PM  GuruFocus.com]
▶ HG Vora Capitals Returns, AUM and Holdings   [01:48PM  Insider Monkey]
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