Intrinsic value of Leucadia National - LUK

Previous Close

$23.47

  Intrinsic Value

$154.36

stock screener

  Rating & Target

str. buy

+558%

Previous close

$23.47

 
Intrinsic value

$154.36

 
Up/down potential

+558%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as LUK.

We calculate the intrinsic value of LUK 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 8.4

 

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, %
  13.70
  12.83
  12.05
  11.34
  10.71
  10.14
  9.62
  9.16
  8.75
  8.37
  8.03
  7.73
  7.46
  7.21
  6.99
  6.79
  6.61
  6.45
  6.31
  6.18
  6.06
  5.95
  5.86
  5.77
  5.69
  5.62
  5.56
  5.51
  5.46
  5.41
Revenue, $m
  13,003
  14,671
  16,438
  18,303
  20,263
  22,317
  24,465
  26,706
  29,041
  31,472
  34,000
  36,629
  39,360
  42,199
  45,148
  48,215
  51,403
  54,718
  58,169
  61,761
  65,502
  69,401
  73,466
  77,705
  82,130
  86,749
  91,574
  96,616
  101,887
  107,399
Variable operating expenses, $m
  4,205
  4,713
  5,251
  5,819
  6,416
  7,041
  7,695
  8,377
  9,088
  9,828
  10,352
  11,152
  11,984
  12,848
  13,746
  14,680
  15,650
  16,660
  17,710
  18,804
  19,943
  21,130
  22,368
  23,658
  25,005
  26,412
  27,881
  29,416
  31,021
  32,699
Fixed operating expenses, $m
  6,801
  6,951
  7,104
  7,260
  7,420
  7,583
  7,750
  7,921
  8,095
  8,273
  8,455
  8,641
  8,831
  9,025
  9,224
  9,427
  9,634
  9,846
  10,063
  10,284
  10,510
  10,742
  10,978
  11,219
  11,466
  11,718
  11,976
  12,240
  12,509
  12,784
Total operating expenses, $m
  11,006
  11,664
  12,355
  13,079
  13,836
  14,624
  15,445
  16,298
  17,183
  18,101
  18,807
  19,793
  20,815
  21,873
  22,970
  24,107
  25,284
  26,506
  27,773
  29,088
  30,453
  31,872
  33,346
  34,877
  36,471
  38,130
  39,857
  41,656
  43,530
  45,483
Operating income, $m
  1,996
  3,007
  4,083
  5,224
  6,427
  7,693
  9,020
  10,408
  11,858
  13,371
  15,194
  16,836
  18,545
  20,325
  22,179
  24,108
  26,118
  28,213
  30,396
  32,673
  35,049
  37,529
  40,120
  42,828
  45,658
  48,619
  51,717
  54,961
  58,357
  61,916
EBITDA, $m
  2,608
  3,665
  4,791
  5,984
  7,243
  8,566
  9,953
  11,405
  12,921
  14,502
  16,149
  17,865
  19,651
  21,511
  23,447
  25,463
  27,563
  29,750
  32,031
  34,408
  36,890
  39,480
  42,185
  45,011
  47,966
  51,057
  54,290
  57,676
  61,220
  64,934
Interest expense (income), $m
  957
  944
  1,215
  1,503
  1,808
  2,130
  2,468
  2,823
  3,193
  3,580
  3,983
  4,403
  4,839
  5,293
  5,764
  6,254
  6,763
  7,292
  7,842
  8,415
  9,010
  9,630
  10,276
  10,948
  11,650
  12,382
  13,145
  13,942
  14,775
  15,645
  16,555
Earnings before tax, $m
  1,053
  1,792
  2,580
  3,416
  4,297
  5,225
  6,197
  7,215
  8,278
  9,388
  10,791
  11,997
  13,253
  14,561
  15,925
  17,345
  18,826
  20,370
  21,981
  23,663
  25,419
  27,254
  29,172
  31,178
  33,277
  35,474
  37,775
  40,185
  42,712
  45,361
Tax expense, $m
  284
  484
  697
  922
  1,160
  1,411
  1,673
  1,948
  2,235
  2,535
  2,914
  3,239
  3,578
  3,932
  4,300
  4,683
  5,083
  5,500
  5,935
  6,389
  6,863
  7,359
  7,876
  8,418
  8,985
  9,578
  10,199
  10,850
  11,532
  12,247
Net income, $m
  768
  1,308
  1,883
  2,493
  3,137
  3,814
  4,524
  5,267
  6,043
  6,853
  7,877
  8,758
  9,675
  10,630
  11,625
  12,662
  13,743
  14,870
  16,046
  17,274
  18,556
  19,895
  21,295
  22,760
  24,292
  25,896
  27,576
  29,335
  31,180
  33,113

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
  53,072
  59,882
  67,095
  74,706
  82,705
  91,089
  99,855
  109,003
  118,536
  128,458
  138,777
  149,505
  160,654
  172,239
  184,279
  196,794
  209,806
  223,341
  237,424
  252,086
  267,356
  283,269
  299,860
  317,165
  335,224
  354,079
  373,773
  394,353
  415,866
  438,364
Adjusted assets (=assets-cash), $m
  53,072
  59,882
  67,095
  74,706
  82,705
  91,089
  99,855
  109,003
  118,536
  128,458
  138,777
  149,505
  160,654
  172,239
  184,279
  196,794
  209,806
  223,341
  237,424
  252,086
  267,356
  283,269
  299,860
  317,165
  335,224
  354,079
  373,773
  394,353
  415,866
  438,364
Revenue / Adjusted assets
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
  0.245
Average production assets, $m
  3,654
  4,123
  4,619
  5,143
  5,694
  6,271
  6,875
  7,504
  8,161
  8,844
  9,554
  10,293
  11,060
  11,858
  12,687
  13,548
  14,444
  15,376
  16,345
  17,355
  18,406
  19,502
  20,644
  21,835
  23,079
  24,377
  25,732
  27,149
  28,630
  30,179
Working capital, $m
  -8,153
  -9,199
  -10,307
  -11,476
  -12,705
  -13,993
  -15,339
  -16,745
  -18,209
  -19,733
  -21,318
  -22,966
  -24,679
  -26,459
  -28,308
  -30,231
  -32,229
  -34,308
  -36,472
  -38,724
  -41,070
  -43,514
  -46,063
  -48,721
  -51,495
  -54,392
  -57,417
  -60,579
  -63,883
  -67,339
Total debt, $m
  22,505
  27,836
  33,485
  39,443
  45,707
  52,272
  59,136
  66,298
  73,762
  81,531
  89,612
  98,011
  106,741
  115,812
  125,240
  135,039
  145,227
  155,825
  166,852
  178,332
  190,289
  202,749
  215,739
  229,289
  243,429
  258,193
  273,613
  289,727
  306,572
  324,188
Total liabilities, $m
  41,556
  46,887
  52,536
  58,495
  64,758
  71,323
  78,187
  85,349
  92,813
  100,582
  108,663
  117,062
  125,792
  134,863
  144,291
  154,090
  164,278
  174,876
  185,903
  197,383
  209,340
  221,800
  234,790
  248,340
  262,480
  277,244
  292,665
  308,778
  325,623
  343,239
Total equity, $m
  11,517
  12,994
  14,560
  16,211
  17,947
  19,766
  21,669
  23,654
  25,722
  27,875
  30,115
  32,443
  34,862
  37,376
  39,989
  42,704
  45,528
  48,465
  51,521
  54,703
  58,016
  61,469
  65,070
  68,825
  72,744
  76,835
  81,109
  85,575
  90,243
  95,125
Total liabilities and equity, $m
  53,073
  59,881
  67,096
  74,706
  82,705
  91,089
  99,856
  109,003
  118,535
  128,457
  138,778
  149,505
  160,654
  172,239
  184,280
  196,794
  209,806
  223,341
  237,424
  252,086
  267,356
  283,269
  299,860
  317,165
  335,224
  354,079
  373,774
  394,353
  415,866
  438,364
Debt-to-equity ratio
  1.950
  2.140
  2.300
  2.430
  2.550
  2.640
  2.730
  2.800
  2.870
  2.920
  2.980
  3.020
  3.060
  3.100
  3.130
  3.160
  3.190
  3.220
  3.240
  3.260
  3.280
  3.300
  3.320
  3.330
  3.350
  3.360
  3.370
  3.390
  3.400
  3.410
Adjusted equity ratio
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217
  0.217

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  768
  1,308
  1,883
  2,493
  3,137
  3,814
  4,524
  5,267
  6,043
  6,853
  7,877
  8,758
  9,675
  10,630
  11,625
  12,662
  13,743
  14,870
  16,046
  17,274
  18,556
  19,895
  21,295
  22,760
  24,292
  25,896
  27,576
  29,335
  31,180
  33,113
Depreciation, amort., depletion, $m
  612
  659
  708
  761
  816
  873
  934
  997
  1,062
  1,131
  955
  1,029
  1,106
  1,186
  1,269
  1,355
  1,444
  1,538
  1,635
  1,735
  1,841
  1,950
  2,064
  2,184
  2,308
  2,438
  2,573
  2,715
  2,863
  3,018
Funds from operations, $m
  1,380
  1,966
  2,592
  3,254
  3,953
  4,687
  5,458
  6,263
  7,105
  7,984
  8,833
  9,787
  10,781
  11,816
  12,894
  14,017
  15,188
  16,408
  17,681
  19,009
  20,397
  21,845
  23,360
  24,943
  26,600
  28,333
  30,149
  32,050
  34,043
  36,131
Change in working capital, $m
  -982
  -1,046
  -1,108
  -1,169
  -1,229
  -1,288
  -1,347
  -1,405
  -1,464
  -1,524
  -1,585
  -1,648
  -1,713
  -1,780
  -1,850
  -1,922
  -1,999
  -2,079
  -2,163
  -2,252
  -2,346
  -2,444
  -2,549
  -2,658
  -2,774
  -2,896
  -3,025
  -3,161
  -3,305
  -3,456
Cash from operations, $m
  2,362
  3,012
  3,700
  4,423
  5,182
  5,975
  6,804
  7,669
  8,570
  9,508
  10,418
  11,435
  12,493
  13,595
  14,743
  15,939
  17,186
  18,487
  19,844
  21,262
  22,742
  24,290
  25,908
  27,602
  29,374
  31,230
  33,174
  35,212
  37,348
  39,587
Maintenance CAPEX, $m
  -322
  -365
  -412
  -462
  -514
  -569
  -627
  -687
  -750
  -816
  -884
  -955
  -1,029
  -1,106
  -1,186
  -1,269
  -1,355
  -1,444
  -1,538
  -1,635
  -1,735
  -1,841
  -1,950
  -2,064
  -2,184
  -2,308
  -2,438
  -2,573
  -2,715
  -2,863
New CAPEX, $m
  -436
  -469
  -497
  -524
  -551
  -577
  -603
  -630
  -656
  -683
  -710
  -739
  -768
  -798
  -829
  -862
  -896
  -932
  -970
  -1,009
  -1,051
  -1,096
  -1,142
  -1,191
  -1,243
  -1,298
  -1,356
  -1,417
  -1,481
  -1,549
Cash from investing activities, $m
  -758
  -834
  -909
  -986
  -1,065
  -1,146
  -1,230
  -1,317
  -1,406
  -1,499
  -1,594
  -1,694
  -1,797
  -1,904
  -2,015
  -2,131
  -2,251
  -2,376
  -2,508
  -2,644
  -2,786
  -2,937
  -3,092
  -3,255
  -3,427
  -3,606
  -3,794
  -3,990
  -4,196
  -4,412
Free cash flow, $m
  1,605
  2,178
  2,791
  3,437
  4,117
  4,829
  5,574
  6,351
  7,163
  8,009
  8,823
  9,741
  10,696
  11,692
  12,729
  13,809
  14,936
  16,111
  17,337
  18,618
  19,956
  21,354
  22,816
  24,346
  25,947
  27,624
  29,381
  31,222
  33,152
  35,175
Issuance/(repayment) of debt, $m
  5,031
  5,332
  5,649
  5,959
  6,264
  6,565
  6,864
  7,163
  7,464
  7,769
  8,080
  8,400
  8,730
  9,071
  9,427
  9,799
  10,189
  10,597
  11,027
  11,480
  11,957
  12,460
  12,990
  13,550
  14,140
  14,763
  15,421
  16,114
  16,845
  17,616
Issuance/(repurchase) of shares, $m
  642
  170
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  5,673
  5,502
  5,649
  5,959
  6,264
  6,565
  6,864
  7,163
  7,464
  7,769
  8,080
  8,400
  8,730
  9,071
  9,427
  9,799
  10,189
  10,597
  11,027
  11,480
  11,957
  12,460
  12,990
  13,550
  14,140
  14,763
  15,421
  16,114
  16,845
  17,616
Total cash flow (excl. dividends), $m
  7,278
  7,680
  8,439
  9,396
  10,380
  11,393
  12,437
  13,514
  14,627
  15,778
  16,904
  18,141
  19,426
  20,763
  22,156
  23,608
  25,124
  26,708
  28,365
  30,098
  31,912
  33,814
  35,806
  37,896
  40,088
  42,387
  44,801
  47,335
  49,996
  52,791
Retained Cash Flow (-), $m
  -1,411
  -1,478
  -1,565
  -1,651
  -1,736
  -1,819
  -1,902
  -1,985
  -2,069
  -2,153
  -2,239
  -2,328
  -2,419
  -2,514
  -2,613
  -2,716
  -2,824
  -2,937
  -3,056
  -3,182
  -3,314
  -3,453
  -3,600
  -3,755
  -3,919
  -4,092
  -4,274
  -4,466
  -4,668
  -4,882
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
  46
  52
  59
  66
  73
  81
  89
  98
  107
  116
  126
  136
  147
  157
  169
  181
  193
  206
  219
  233
  247
  262
  278
  294
  311
  329
  347
  366
  386
  408
Cash available for distribution, $m
  5,867
  6,202
  6,874
  7,745
  8,644
  9,574
  10,535
  11,529
  12,558
  13,625
  14,664
  15,813
  17,007
  18,249
  19,543
  20,893
  22,301
  23,771
  25,309
  26,916
  28,599
  30,360
  32,206
  34,141
  36,169
  38,296
  40,528
  42,870
  45,328
  47,909
Discount rate, %
  9.80
  10.29
  10.80
  11.34
  11.91
  12.51
  13.13
  13.79
  14.48
  15.20
  15.96
  16.76
  17.60
  18.48
  19.40
  20.37
  21.39
  22.46
  23.58
  24.76
  26.00
  27.30
  28.67
  30.10
  31.61
  33.19
  34.85
  36.59
  38.42
  40.34
PV of cash for distribution, $m
  5,344
  5,099
  5,053
  5,039
  4,924
  4,721
  4,441
  4,102
  3,719
  3,309
  2,876
  2,463
  2,067
  1,699
  1,367
  1,075
  826
  620
  453
  322
  223
  150
  98
  62
  38
  22
  13
  7
  4
  2
Current shareholders' claim on cash, %
  92.9
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2
  91.2

Leucadia National Corporation (Leucadia) is a diversified holding company focused on return on investment and long-term value. The Company's segments, based on requirements are Jefferies, National Beef, and Corporate and other. Jefferies is a global full-service, integrated securities and investment banking firm. National Beef processes and markets fresh boxed beef, case-ready beef, beef by-products and wet blue leather for domestic and international markets. Its financial services businesses include Jefferies Group LLC, Leucadia Asset Management, Berkadia Commercial Mortgage, LLC (commercial mortgage banking and servicing), FXCM Group, LLC, HomeFed Corporation (HomeFed) and Foursight Capital and Chrome Capital (vehicle finance). It also owns and has investments in an array of businesses, including National Beef, HRG Group, Inc. (HRG), Vitesse Energy, LLC and Juneau Energy, LLC, Conwed Plastics and Idaho Timber and Golden Queen Mining Company, LLC (a gold and silver mining project).

FINANCIAL RATIOS  of  Leucadia National (LUK)

Valuation Ratios
P/E Ratio 64.9
Price to Sales 0.8
Price to Book 0.8
Price to Tangible Book
Price to Cash Flow 14
Price to Free Cash Flow 29.6
Growth Rates
Sales Growth Rate -7.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 7.8%
Cap. Spend. - 3 Yr. Gr. Rate 14%
Financial Strength
Quick Ratio 24
Current Ratio 0
LT Debt to Equity 179.1%
Total Debt to Equity 184.3%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. 1.4%
Return On Total Capital 0.4%
Ret/ On T. Cap. - 3 Yr. Avg. 0.6%
Return On Equity 1.3%
Return On Equity - 3 Yr. Avg. 2%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 31.7%
Gross Margin - 3 Yr. Avg. 30.2%
EBITDA Margin 14.4%
EBITDA Margin - 3 Yr. Avg. 13.2%
Operating Margin 2.7%
Oper. Margin - 3 Yr. Avg. 2.8%
Pre-Tax Margin 3.1%
Pre-Tax Margin - 3 Yr. Avg. 2.5%
Net Profit Margin 1.3%
Net Profit Margin - 3 Yr. Avg. 1.9%
Effective Tax Rate 38.6%
Eff/ Tax Rate - 3 Yr. Avg. 50.5%
Payout Ratio 70%

LUK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LUK stock intrinsic value calculation we used $11436 million for the last fiscal year's total revenue generated by Leucadia National. The default revenue input number comes from 2017 income statement of Leucadia National. 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 LUK stock valuation model: a) initial revenue growth rate of 13.7% 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 9.8%, whose default value for LUK is calculated based on our internal credit rating of Leucadia National, 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 Leucadia National.
    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 LUK stock the variable cost ratio is equal to 32.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $6655 million in the base year in the intrinsic value calculation for LUK 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 Leucadia National.

Corporate tax rate of 27% is the nominal tax rate for Leucadia National. 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 LUK stock is equal to 0.4%.

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 LUK are equal to 28.1%.

Life of production assets of 10 years is the average useful life of capital assets used in Leucadia National 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 LUK is equal to -62.7%. 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 - $10106 million for Leucadia National - 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 356 million for Leucadia National 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 Leucadia National at the current share price and the inputted number of shares is $8.4 billion.

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