Intrinsic value of Marathon Petroleum Corporation - MPC

Previous Close

$52.47

  Intrinsic Value

$128.41

stock screener

  Rating & Target

str. buy

+145%

Previous close

$52.47

 
Intrinsic value

$128.41

 
Up/down potential

+145%

 
Rating

str. buy

We calculate the intrinsic value of MPC 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 35.3

 

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, %
  53.20
  48.38
  44.04
  40.14
  36.62
  33.46
  30.62
  28.05
  25.75
  23.67
  21.81
  20.13
  18.61
  17.25
  16.03
  14.92
  13.93
  13.04
  12.23
  11.51
  10.86
  10.27
  9.75
  9.27
  8.84
  8.46
  8.11
  7.80
  7.52
  7.27
Revenue, $m
  148,760
  220,730
  317,945
  445,561
  608,743
  812,438
  1,061,170
  1,358,869
  1,708,758
  2,113,283
  2,574,112
  3,092,170
  3,667,718
  4,300,466
  4,989,685
  5,734,343
  6,533,226
  7,385,054
  8,288,583
  9,242,691
  10,246,446
  11,299,166
  12,400,450
  13,550,212
  14,748,693
  15,996,472
  17,294,464
  18,643,920
  20,046,415
  21,503,846
Variable operating expenses, $m
  137,124
  202,489
  290,780
  406,683
  554,887
  739,886
  965,787
  1,236,162
  1,553,935
  1,921,331
  2,337,844
  2,808,351
  3,331,072
  3,905,741
  4,531,699
  5,208,008
  5,933,565
  6,707,207
  7,527,804
  8,394,338
  9,305,962
  10,262,056
  11,262,257
  12,306,487
  13,394,964
  14,528,214
  15,707,068
  16,932,662
  18,206,427
  19,530,086
Fixed operating expenses, $m
  1,429
  1,460
  1,492
  1,525
  1,559
  1,593
  1,628
  1,664
  1,700
  1,738
  1,776
  1,815
  1,855
  1,896
  1,938
  1,980
  2,024
  2,068
  2,114
  2,160
  2,208
  2,256
  2,306
  2,357
  2,409
  2,462
  2,516
  2,571
  2,628
  2,686
Total operating expenses, $m
  138,553
  203,949
  292,272
  408,208
  556,446
  741,479
  967,415
  1,237,826
  1,555,635
  1,923,069
  2,339,620
  2,810,166
  3,332,927
  3,907,637
  4,533,637
  5,209,988
  5,935,589
  6,709,275
  7,529,918
  8,396,498
  9,308,170
  10,264,312
  11,264,563
  12,308,844
  13,397,373
  14,530,676
  15,709,584
  16,935,233
  18,209,055
  19,532,772
Operating income, $m
  10,207
  16,781
  25,672
  37,353
  52,297
  70,959
  93,754
  121,043
  153,122
  190,214
  234,492
  282,004
  334,792
  392,828
  456,048
  524,354
  597,637
  675,779
  758,665
  846,193
  938,276
  1,034,853
  1,135,886
  1,241,368
  1,351,321
  1,465,797
  1,584,881
  1,708,687
  1,837,360
  1,971,075
EBITDA, $m
  15,567
  23,758
  34,832
  49,379
  67,988
  91,226
  119,608
  153,583
  193,520
  239,699
  292,309
  351,456
  417,171
  489,420
  568,119
  653,152
  744,378
  841,653
  944,833
  1,053,790
  1,168,419
  1,288,641
  1,414,410
  1,545,716
  1,682,587
  1,825,089
  1,973,327
  2,127,443
  2,287,618
  2,454,067
Interest expense (income), $m
  478
  1,486
  3,148
  5,462
  8,586
  12,688
  17,933
  24,480
  32,475
  42,043
  53,289
  66,291
  81,103
  97,754
  116,253
  136,591
  158,744
  182,678
  208,355
  235,735
  264,776
  295,442
  327,704
  361,541
  396,938
  433,893
  472,414
  512,520
  554,239
  597,613
  642,691
Earnings before tax, $m
  8,721
  13,633
  20,211
  28,767
  39,609
  53,026
  69,274
  88,569
  111,079
  136,925
  168,201
  200,901
  237,037
  276,575
  319,457
  365,611
  414,959
  467,424
  522,931
  581,417
  642,834
  707,149
  774,346
  844,431
  917,428
  993,383
  1,072,361
  1,154,448
  1,239,747
  1,328,383
Tax expense, $m
  2,355
  3,681
  5,457
  7,767
  10,694
  14,317
  18,704
  23,914
  29,991
  36,970
  45,414
  54,243
  64,000
  74,675
  86,253
  98,715
  112,039
  126,204
  141,191
  156,983
  173,565
  190,930
  209,073
  227,996
  247,705
  268,213
  289,537
  311,701
  334,732
  358,664
Net income, $m
  6,366
  9,952
  14,754
  21,000
  28,915
  38,709
  50,570
  64,655
  81,087
  99,955
  122,787
  146,658
  173,037
  201,900
  233,203
  266,896
  302,920
  341,219
  381,739
  424,435
  469,269
  516,219
  565,272
  616,434
  669,722
  725,169
  782,824
  842,747
  905,016
  969,720

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
  142,354
  211,225
  304,253
  426,374
  582,529
  777,453
  1,015,473
  1,300,353
  1,635,175
  2,022,281
  2,463,265
  2,959,014
  3,509,778
  4,115,278
  4,774,818
  5,487,409
  6,251,891
  7,067,037
  7,931,659
  8,844,680
  9,805,212
  10,812,599
  11,866,459
  12,966,710
  14,113,582
  15,307,629
  16,549,727
  17,841,072
  19,183,173
  20,577,843
Adjusted assets (=assets-cash), $m
  142,354
  211,225
  304,253
  426,374
  582,529
  777,453
  1,015,473
  1,300,353
  1,635,175
  2,022,281
  2,463,265
  2,959,014
  3,509,778
  4,115,278
  4,774,818
  5,487,409
  6,251,891
  7,067,037
  7,931,659
  8,844,680
  9,805,212
  10,812,599
  11,866,459
  12,966,710
  14,113,582
  15,307,629
  16,549,727
  17,841,072
  19,183,173
  20,577,843
Revenue / Adjusted assets
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
  1.045
Average production assets, $m
  63,818
  94,693
  136,398
  191,145
  261,151
  348,536
  455,242
  582,955
  733,057
  906,599
  1,104,294
  1,326,541
  1,573,451
  1,844,900
  2,140,575
  2,460,033
  2,802,754
  3,168,188
  3,555,802
  3,965,114
  4,395,726
  4,847,342
  5,319,793
  5,813,041
  6,327,189
  6,862,486
  7,419,325
  7,998,242
  8,599,912
  9,225,150
Working capital, $m
  5,653
  8,388
  12,082
  16,931
  23,132
  30,873
  40,324
  51,637
  64,933
  80,305
  97,816
  117,502
  139,373
  163,418
  189,608
  217,905
  248,263
  280,632
  314,966
  351,222
  389,365
  429,368
  471,217
  514,908
  560,450
  607,866
  657,190
  708,469
  761,764
  817,146
Total debt, $m
  58,303
  101,141
  159,004
  234,963
  332,092
  453,334
  601,383
  778,579
  986,838
  1,227,618
  1,501,910
  1,810,266
  2,152,841
  2,529,462
  2,939,696
  3,382,928
  3,858,435
  4,365,456
  4,903,251
  5,471,150
  6,068,601
  6,695,196
  7,350,697
  8,035,052
  8,748,407
  9,491,104
  10,263,689
  11,066,906
  11,901,692
  12,769,178
Total liabilities, $m
  88,544
  131,382
  189,245
  265,204
  362,333
  483,575
  631,624
  808,820
  1,017,079
  1,257,859
  1,532,151
  1,840,507
  2,183,082
  2,559,703
  2,969,937
  3,413,169
  3,888,676
  4,395,697
  4,933,492
  5,501,391
  6,098,842
  6,725,437
  7,380,938
  8,065,293
  8,778,648
  9,521,345
  10,293,930
  11,097,147
  11,931,933
  12,799,419
Total equity, $m
  53,810
  79,843
  115,008
  161,169
  220,196
  293,877
  383,849
  491,533
  618,096
  764,422
  931,114
  1,118,507
  1,326,696
  1,555,575
  1,804,881
  2,074,241
  2,363,215
  2,671,340
  2,998,167
  3,343,289
  3,706,370
  4,087,162
  4,485,522
  4,901,416
  5,334,934
  5,786,284
  6,255,797
  6,743,925
  7,251,239
  7,778,425
Total liabilities and equity, $m
  142,354
  211,225
  304,253
  426,373
  582,529
  777,452
  1,015,473
  1,300,353
  1,635,175
  2,022,281
  2,463,265
  2,959,014
  3,509,778
  4,115,278
  4,774,818
  5,487,410
  6,251,891
  7,067,037
  7,931,659
  8,844,680
  9,805,212
  10,812,599
  11,866,460
  12,966,709
  14,113,582
  15,307,629
  16,549,727
  17,841,072
  19,183,172
  20,577,844
Debt-to-equity ratio
  1.080
  1.270
  1.380
  1.460
  1.510
  1.540
  1.570
  1.580
  1.600
  1.610
  1.610
  1.620
  1.620
  1.630
  1.630
  1.630
  1.630
  1.630
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
  1.640
Adjusted equity ratio
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378
  0.378

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6,366
  9,952
  14,754
  21,000
  28,915
  38,709
  50,570
  64,655
  81,087
  99,955
  122,787
  146,658
  173,037
  201,900
  233,203
  266,896
  302,920
  341,219
  381,739
  424,435
  469,269
  516,219
  565,272
  616,434
  669,722
  725,169
  782,824
  842,747
  905,016
  969,720
Depreciation, amort., depletion, $m
  5,360
  6,976
  9,160
  12,026
  15,691
  20,266
  25,853
  32,540
  40,398
  49,484
  57,816
  69,452
  82,380
  96,592
  112,072
  128,798
  146,741
  165,874
  186,168
  207,598
  230,143
  253,788
  278,523
  304,348
  331,266
  359,292
  388,446
  418,756
  450,257
  482,992
Funds from operations, $m
  11,726
  16,928
  23,913
  33,026
  44,606
  58,976
  76,423
  97,195
  121,486
  149,440
  180,603
  216,110
  255,417
  298,491
  345,275
  395,693
  449,661
  507,093
  567,907
  632,032
  699,412
  770,006
  843,796
  920,782
  1,000,989
  1,084,462
  1,171,270
  1,261,503
  1,355,273
  1,452,712
Change in working capital, $m
  1,963
  2,735
  3,694
  4,849
  6,201
  7,740
  9,452
  11,313
  13,296
  15,372
  17,511
  19,686
  21,871
  24,044
  26,190
  28,297
  30,358
  32,369
  34,334
  36,256
  38,143
  40,003
  41,849
  43,691
  45,542
  47,416
  49,324
  51,279
  53,295
  55,382
Cash from operations, $m
  9,763
  14,193
  20,219
  28,176
  38,405
  51,235
  66,972
  85,882
  108,190
  134,068
  163,092
  196,424
  233,546
  274,447
  319,085
  367,396
  419,304
  474,723
  533,573
  595,776
  661,269
  730,003
  801,947
  877,091
  955,446
  1,037,046
  1,121,946
  1,210,224
  1,301,978
  1,397,330
Maintenance CAPEX, $m
  -2,183
  -3,341
  -4,958
  -7,141
  -10,008
  -13,673
  -18,248
  -23,835
  -30,521
  -38,380
  -47,466
  -57,816
  -69,452
  -82,380
  -96,592
  -112,072
  -128,798
  -146,741
  -165,874
  -186,168
  -207,598
  -230,143
  -253,788
  -278,523
  -304,348
  -331,266
  -359,292
  -388,446
  -418,756
  -450,257
New CAPEX, $m
  -22,125
  -30,875
  -41,705
  -54,747
  -70,005
  -87,385
  -106,706
  -127,713
  -150,102
  -173,541
  -197,696
  -222,247
  -246,910
  -271,449
  -295,675
  -319,458
  -342,721
  -365,434
  -387,614
  -409,312
  -430,611
  -451,617
  -472,451
  -493,248
  -514,148
  -535,297
  -556,839
  -578,916
  -601,671
  -625,238
Cash from investing activities, $m
  -24,308
  -34,216
  -46,663
  -61,888
  -80,013
  -101,058
  -124,954
  -151,548
  -180,623
  -211,921
  -245,162
  -280,063
  -316,362
  -353,829
  -392,267
  -431,530
  -471,519
  -512,175
  -553,488
  -595,480
  -638,209
  -681,760
  -726,239
  -771,771
  -818,496
  -866,563
  -916,131
  -967,362
  -1,020,427
  -1,075,495
Free cash flow, $m
  -14,545
  -20,023
  -26,443
  -33,712
  -41,608
  -49,823
  -57,982
  -65,666
  -72,433
  -77,854
  -82,070
  -83,639
  -82,817
  -79,381
  -73,182
  -64,134
  -52,215
  -37,452
  -19,915
  296
  23,060
  48,243
  75,708
  105,320
  136,950
  170,483
  205,815
  242,861
  281,551
  321,835
Issuance/(repayment) of debt, $m
  30,779
  42,838
  57,863
  75,959
  97,129
  121,242
  148,049
  177,195
  208,259
  240,780
  274,292
  308,356
  342,575
  376,621
  410,234
  443,232
  475,508
  507,021
  537,794
  567,899
  597,451
  626,595
  655,501
  684,356
  713,354
  742,697
  772,585
  803,217
  834,787
  867,485
Issuance/(repurchase) of shares, $m
  12,269
  16,081
  20,411
  25,162
  30,112
  34,972
  39,401
  43,029
  45,475
  46,371
  43,905
  40,735
  35,152
  26,979
  16,103
  2,464
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  43,048
  58,919
  78,274
  101,121
  127,241
  156,214
  187,450
  220,224
  253,734
  287,151
  318,197
  349,091
  377,727
  403,600
  426,337
  445,696
  475,508
  507,021
  537,794
  567,899
  597,451
  626,595
  655,501
  684,356
  713,354
  742,697
  772,585
  803,217
  834,787
  867,485
Total cash flow (excl. dividends), $m
  28,503
  38,896
  51,831
  67,409
  85,633
  106,392
  129,468
  154,559
  181,301
  209,297
  236,128
  265,452
  294,910
  324,219
  353,155
  381,562
  423,293
  469,569
  517,880
  568,196
  620,511
  674,838
  731,210
  789,676
  850,305
  913,180
  978,400
  1,046,077
  1,116,338
  1,189,320
Retained Cash Flow (-), $m
  -18,635
  -26,033
  -35,165
  -46,162
  -59,027
  -73,681
  -89,972
  -107,685
  -126,563
  -146,326
  -166,692
  -187,393
  -208,189
  -228,879
  -249,306
  -269,360
  -288,974
  -308,125
  -326,827
  -345,122
  -363,081
  -380,792
  -398,359
  -415,895
  -433,518
  -451,350
  -469,513
  -488,128
  -507,314
  -527,186
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
  9,868
  12,863
  16,666
  21,247
  26,606
  32,710
  39,496
  46,875
  54,738
  62,971
  69,436
  78,059
  86,721
  95,340
  103,849
  112,202
  134,319
  161,444
  191,053
  223,074
  257,430
  294,046
  332,850
  373,781
  416,787
  461,830
  508,887
  557,949
  609,024
  662,134
Discount rate, %
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.12
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.82
  25.01
  26.26
  27.58
PV of cash for distribution, $m
  9,248
  11,227
  13,458
  15,759
  17,987
  19,993
  21,635
  22,799
  23,407
  23,425
  22,220
  21,234
  19,800
  18,026
  16,030
  13,927
  13,194
  12,339
  11,159
  9,770
  8,287
  6,811
  5,426
  4,189
  3,132
  2,268
  1,588
  1,076
  704
  444
Current shareholders' claim on cash, %
  74.2
  57.2
  45.6
  37.5
  31.6
  27.3
  24.1
  21.6
  19.8
  18.4
  17.4
  16.7
  16.2
  15.9
  15.7
  15.7
  15.7
  15.7
  15.7
  15.7
  15.7
  15.7
  15.7
  15.7
  15.7
  15.7
  15.7
  15.7
  15.7
  15.7

Marathon Petroleum Corporation is engaged in refining, marketing, retail and transportation businesses in the United States and the largest east of the Mississippi. The Company operates through three segments: Refining & Marketing; Speedway; and Midstream. The Refining & Marketing segment refines crude oil and other feedstocks at the Company's seven refineries in the Gulf Coast and Midwest regions of the United States. Its Speedway segment sells transportation fuels and convenience products in the retail market in the Midwest, East Coast and Southeast regions of the United States. The Company's Midstream is engaged in the operations of MPLX LP and certain other related operations. It gathers, processes and transports natural gas, natural gas liquids (NGLs), crude oil and refined products. MPLX is a limited partnership which owns, operates, develops and acquires midstream energy infrastructure assets.

FINANCIAL RATIOS  of  Marathon Petroleum Corporation (MPC)

Valuation Ratios
P/E Ratio 23.6
Price to Sales 0.4
Price to Book 2
Price to Tangible Book
Price to Cash Flow 7
Price to Free Cash Flow 25.3
Growth Rates
Sales Growth Rate -12.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 44.7%
Cap. Spend. - 3 Yr. Gr. Rate 19.1%
Financial Strength
Quick Ratio 32
Current Ratio 0
LT Debt to Equity 77.8%
Total Debt to Equity 78%
Interest Coverage 5
Management Effectiveness
Return On Assets 3.4%
Ret/ On Assets - 3 Yr. Avg. 6.9%
Return On Total Capital 4.8%
Ret/ On T. Cap. - 3 Yr. Avg. 11.4%
Return On Equity 8.8%
Return On Equity - 3 Yr. Avg. 18.6%
Asset Turnover 1.4
Profitability Ratios
Gross Margin 10%
Gross Margin - 3 Yr. Avg. 9.5%
EBITDA Margin 6.8%
EBITDA Margin - 3 Yr. Avg. 6.9%
Operating Margin 3.8%
Oper. Margin - 3 Yr. Avg. 4.8%
Pre-Tax Margin 2.9%
Pre-Tax Margin - 3 Yr. Avg. 4.3%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 2.8%
Effective Tax Rate 33.4%
Eff/ Tax Rate - 3 Yr. Avg. 33.7%
Payout Ratio 61.2%

MPC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MPC stock intrinsic value calculation we used $97102 million for the last fiscal year's total revenue generated by Marathon Petroleum Corporation. The default revenue input number comes from 0001 income statement of Marathon Petroleum Corporation. 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 MPC stock valuation model: a) initial revenue growth rate of 53.2% 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 6.7%, whose default value for MPC is calculated based on our internal credit rating of Marathon Petroleum Corporation, 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 Marathon Petroleum Corporation.
    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 MPC stock the variable cost ratio is equal to 92.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1398 million in the base year in the intrinsic value calculation for MPC 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 Marathon Petroleum Corporation.

Corporate tax rate of 27% is the nominal tax rate for Marathon Petroleum Corporation. 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 MPC 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 MPC are equal to 42.9%.

Life of production assets of 19.1 years is the average useful life of capital assets used in Marathon Petroleum Corporation 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 MPC is equal to 3.8%. 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 - $35175 million for Marathon Petroleum Corporation - 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 673.615 million for Marathon Petroleum Corporation 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 Marathon Petroleum Corporation at the current share price and the inputted number of shares is $35.3 billion.

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