Intrinsic value of Micron Technology - MU

Previous Close

$50.62

  Intrinsic Value

$2,485

stock screener

  Rating & Target

str. buy

+999%

Previous close

$50.62

 
Intrinsic value

$2,485

 
Up/down potential

+999%

 
Rating

str. buy

We calculate the intrinsic value of MU 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 55.1

 

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, %
  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
  32,515
  50,236
  75,128
  109,007
  153,793
  211,430
  283,801
  372,648
  479,508
  605,657
  752,089
  919,500
  1,108,307
  1,318,667
  1,550,518
  1,803,624
  2,077,624
  2,372,074
  2,686,498
  3,020,421
  3,373,409
  3,745,092
  4,135,190
  4,543,524
  4,970,032
  5,414,772
  5,877,930
  6,359,817
  6,860,869
  7,381,648
Variable operating expenses, $m
  9,040
  13,879
  20,675
  29,926
  42,155
  57,893
  77,654
  101,914
  131,092
  165,538
  205,360
  251,072
  302,627
  360,066
  423,373
  492,485
  567,301
  647,702
  733,556
  824,735
  921,119
  1,022,609
  1,129,126
  1,240,623
  1,357,082
  1,478,520
  1,604,986
  1,736,567
  1,873,381
  2,015,581
Fixed operating expenses, $m
  9,142
  9,343
  9,548
  9,759
  9,973
  10,193
  10,417
  10,646
  10,880
  11,120
  11,364
  11,614
  11,870
  12,131
  12,398
  12,671
  12,949
  13,234
  13,525
  13,823
  14,127
  14,438
  14,755
  15,080
  15,412
  15,751
  16,097
  16,451
  16,813
  17,183
Total operating expenses, $m
  18,182
  23,222
  30,223
  39,685
  52,128
  68,086
  88,071
  112,560
  141,972
  176,658
  216,724
  262,686
  314,497
  372,197
  435,771
  505,156
  580,250
  660,936
  747,081
  838,558
  935,246
  1,037,047
  1,143,881
  1,255,703
  1,372,494
  1,494,271
  1,621,083
  1,753,018
  1,890,194
  2,032,764
Operating income, $m
  14,334
  27,014
  44,904
  69,322
  101,665
  143,344
  195,730
  260,088
  337,535
  428,999
  535,364
  656,814
  793,811
  946,470
  1,114,747
  1,298,469
  1,497,373
  1,711,138
  1,939,416
  2,181,863
  2,438,163
  2,708,046
  2,991,309
  3,287,822
  3,597,538
  3,920,502
  4,256,847
  4,606,798
  4,970,675
  5,348,884
EBITDA, $m
  17,399
  31,662
  51,774
  79,218
  115,560
  162,386
  221,235
  293,527
  380,516
  483,246
  602,526
  738,925
  892,783
  1,064,227
  1,253,208
  1,459,533
  1,682,905
  1,922,964
  2,179,320
  2,451,587
  2,739,408
  3,042,483
  3,360,581
  3,693,558
  4,041,362
  4,404,041
  4,781,746
  5,174,730
  5,583,351
  6,008,065
Interest expense (income), $m
  468
  630
  1,199
  2,025
  3,186
  4,766
  6,854
  9,541
  12,916
  17,059
  22,041
  27,923
  34,751
  42,557
  51,361
  61,169
  71,980
  83,781
  96,557
  110,287
  124,947
  140,517
  156,976
  174,307
  192,496
  211,536
  231,423
  252,160
  273,756
  296,225
  319,587
Earnings before tax, $m
  13,703
  25,815
  42,879
  66,136
  96,899
  136,490
  186,188
  247,172
  320,476
  406,958
  507,441
  622,063
  751,254
  895,109
  1,053,577
  1,226,489
  1,413,592
  1,614,581
  1,829,129
  2,056,916
  2,297,645
  2,551,070
  2,817,002
  3,095,325
  3,386,003
  3,689,079
  4,004,687
  4,333,043
  4,674,450
  5,029,297
Tax expense, $m
  3,700
  6,970
  11,577
  17,857
  26,163
  36,852
  50,271
  66,736
  86,529
  109,879
  137,009
  167,957
  202,839
  241,680
  284,466
  331,152
  381,670
  435,937
  493,865
  555,367
  620,364
  688,789
  760,591
  835,738
  914,221
  996,051
  1,081,265
  1,169,922
  1,262,102
  1,357,910
Net income, $m
  10,003
  18,845
  31,301
  48,279
  70,736
  99,638
  135,917
  180,436
  233,948
  297,079
  370,432
  454,106
  548,415
  653,430
  769,112
  895,337
  1,031,922
  1,178,644
  1,335,265
  1,501,548
  1,677,281
  1,862,281
  2,056,411
  2,259,588
  2,471,782
  2,693,028
  2,923,421
  3,163,121
  3,412,349
  3,671,387

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
  56,352
  87,064
  130,204
  188,920
  266,539
  366,429
  491,855
  645,837
  831,036
  1,049,665
  1,303,446
  1,593,588
  1,920,809
  2,285,384
  2,687,206
  3,125,866
  3,600,735
  4,111,047
  4,655,975
  5,234,698
  5,846,462
  6,490,628
  7,166,707
  7,874,392
  8,613,574
  9,384,354
  10,187,054
  11,022,212
  11,890,588
  12,793,151
Adjusted assets (=assets-cash), $m
  56,352
  87,064
  130,204
  188,920
  266,539
  366,429
  491,855
  645,837
  831,036
  1,049,665
  1,303,446
  1,593,588
  1,920,809
  2,285,384
  2,687,206
  3,125,866
  3,600,735
  4,111,047
  4,655,975
  5,234,698
  5,846,462
  6,490,628
  7,166,707
  7,874,392
  8,613,574
  9,384,354
  10,187,054
  11,022,212
  11,890,588
  12,793,151
Revenue / Adjusted assets
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
Average production assets, $m
  29,036
  44,861
  67,089
  97,343
  137,337
  188,807
  253,434
  332,775
  428,200
  540,852
  671,615
  821,114
  989,718
  1,177,569
  1,384,612
  1,610,637
  1,855,318
  2,118,262
  2,399,042
  2,697,236
  3,012,454
  3,344,368
  3,692,725
  4,057,367
  4,438,239
  4,835,392
  5,248,991
  5,679,316
  6,126,756
  6,591,812
Working capital, $m
  -878
  -1,356
  -2,028
  -2,943
  -4,152
  -5,709
  -7,663
  -10,061
  -12,947
  -16,353
  -20,306
  -24,827
  -29,924
  -35,604
  -41,864
  -48,698
  -56,096
  -64,046
  -72,535
  -81,551
  -91,082
  -101,117
  -111,650
  -122,675
  -134,191
  -146,199
  -158,704
  -171,715
  -185,243
  -199,305
Total debt, $m
  21,038
  35,534
  55,896
  83,610
  120,246
  167,395
  226,596
  299,275
  386,689
  489,882
  609,667
  746,614
  901,062
  1,073,141
  1,262,801
  1,469,849
  1,693,987
  1,934,854
  2,192,060
  2,465,217
  2,753,970
  3,058,016
  3,377,126
  3,711,153
  4,060,047
  4,423,855
  4,802,729
  5,196,924
  5,606,797
  6,032,807
Total liabilities, $m
  26,598
  41,094
  61,456
  89,170
  125,806
  172,955
  232,156
  304,835
  392,249
  495,442
  615,227
  752,174
  906,622
  1,078,701
  1,268,361
  1,475,409
  1,699,547
  1,940,414
  2,197,620
  2,470,777
  2,759,530
  3,063,576
  3,382,686
  3,716,713
  4,065,607
  4,429,415
  4,808,289
  5,202,484
  5,612,357
  6,038,367
Total equity, $m
  29,754
  45,970
  68,748
  99,750
  140,732
  193,475
  259,700
  341,002
  438,787
  554,223
  688,220
  841,415
  1,014,187
  1,206,683
  1,418,845
  1,650,457
  1,901,188
  2,170,633
  2,458,355
  2,763,921
  3,086,932
  3,427,052
  3,784,022
  4,157,679
  4,547,967
  4,954,939
  5,378,764
  5,819,728
  6,278,230
  6,754,784
Total liabilities and equity, $m
  56,352
  87,064
  130,204
  188,920
  266,538
  366,430
  491,856
  645,837
  831,036
  1,049,665
  1,303,447
  1,593,589
  1,920,809
  2,285,384
  2,687,206
  3,125,866
  3,600,735
  4,111,047
  4,655,975
  5,234,698
  5,846,462
  6,490,628
  7,166,708
  7,874,392
  8,613,574
  9,384,354
  10,187,053
  11,022,212
  11,890,587
  12,793,151
Debt-to-equity ratio
  0.710
  0.770
  0.810
  0.840
  0.850
  0.870
  0.870
  0.880
  0.880
  0.880
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
  0.890
Adjusted equity ratio
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528
  0.528

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  10,003
  18,845
  31,301
  48,279
  70,736
  99,638
  135,917
  180,436
  233,948
  297,079
  370,432
  454,106
  548,415
  653,430
  769,112
  895,337
  1,031,922
  1,178,644
  1,335,265
  1,501,548
  1,677,281
  1,862,281
  2,056,411
  2,259,588
  2,471,782
  2,693,028
  2,923,421
  3,163,121
  3,412,349
  3,671,387
Depreciation, amort., depletion, $m
  3,065
  4,648
  6,870
  9,896
  13,895
  19,042
  25,505
  33,439
  42,982
  54,247
  67,162
  82,111
  98,972
  117,757
  138,461
  161,064
  185,532
  211,826
  239,904
  269,724
  301,245
  334,437
  369,272
  405,737
  443,824
  483,539
  524,899
  567,932
  612,676
  659,181
Funds from operations, $m
  13,068
  23,493
  38,172
  58,175
  84,631
  118,680
  161,422
  213,874
  276,929
  351,326
  437,593
  536,217
  647,387
  771,187
  907,573
  1,056,401
  1,217,454
  1,390,470
  1,575,169
  1,771,272
  1,978,526
  2,196,718
  2,425,684
  2,665,324
  2,915,606
  3,176,567
  3,448,320
  3,731,053
  4,025,024
  4,330,568
Change in working capital, $m
  -329
  -478
  -672
  -915
  -1,209
  -1,556
  -1,954
  -2,399
  -2,885
  -3,406
  -3,954
  -4,520
  -5,098
  -5,680
  -6,260
  -6,834
  -7,398
  -7,950
  -8,489
  -9,016
  -9,531
  -10,035
  -10,533
  -11,025
  -11,516
  -12,008
  -12,505
  -13,011
  -13,528
  -14,061
Cash from operations, $m
  13,398
  23,971
  38,844
  59,090
  85,841
  120,236
  163,376
  216,273
  279,814
  354,732
  441,547
  540,737
  652,485
  776,866
  913,833
  1,063,235
  1,224,852
  1,398,421
  1,583,658
  1,780,288
  1,988,057
  2,206,753
  2,436,217
  2,676,349
  2,927,121
  3,188,575
  3,460,826
  3,744,064
  4,038,553
  4,344,629
Maintenance CAPEX, $m
  -1,815
  -2,904
  -4,486
  -6,709
  -9,734
  -13,734
  -18,881
  -25,343
  -33,277
  -42,820
  -54,085
  -67,162
  -82,111
  -98,972
  -117,757
  -138,461
  -161,064
  -185,532
  -211,826
  -239,904
  -269,724
  -301,245
  -334,437
  -369,272
  -405,737
  -443,824
  -483,539
  -524,899
  -567,932
  -612,676
New CAPEX, $m
  -10,886
  -15,825
  -22,228
  -30,254
  -39,994
  -51,470
  -64,627
  -79,341
  -95,425
  -112,651
  -130,763
  -149,499
  -168,604
  -187,851
  -207,043
  -226,024
  -244,682
  -262,944
  -280,780
  -298,193
  -315,218
  -331,914
  -348,357
  -364,642
  -380,871
  -397,153
  -413,600
  -430,325
  -447,440
  -465,056
Cash from investing activities, $m
  -12,701
  -18,729
  -26,714
  -36,963
  -49,728
  -65,204
  -83,508
  -104,684
  -128,702
  -155,471
  -184,848
  -216,661
  -250,715
  -286,823
  -324,800
  -364,485
  -405,746
  -448,476
  -492,606
  -538,097
  -584,942
  -633,159
  -682,794
  -733,914
  -786,608
  -840,977
  -897,139
  -955,224
  -1,015,372
  -1,077,732
Free cash flow, $m
  696
  5,243
  12,129
  22,127
  36,112
  55,033
  79,868
  111,589
  151,111
  199,261
  256,699
  324,077
  401,769
  490,044
  589,033
  698,749
  819,107
  949,945
  1,091,052
  1,242,190
  1,403,115
  1,573,594
  1,753,422
  1,942,434
  2,140,513
  2,347,598
  2,563,687
  2,788,840
  3,023,181
  3,266,897
Issuance/(repayment) of debt, $m
  9,977
  14,496
  20,362
  27,714
  36,636
  47,148
  59,201
  72,679
  87,414
  103,193
  119,785
  136,947
  154,448
  172,079
  189,660
  207,047
  224,138
  240,867
  257,206
  273,157
  288,753
  304,046
  319,109
  334,027
  348,894
  363,808
  378,874
  394,195
  409,873
  426,010
Issuance/(repurchase) of shares, $m
  1,130
  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 from financing (excl. dividends), $m  
  11,107
  14,496
  20,362
  27,714
  36,636
  47,148
  59,201
  72,679
  87,414
  103,193
  119,785
  136,947
  154,448
  172,079
  189,660
  207,047
  224,138
  240,867
  257,206
  273,157
  288,753
  304,046
  319,109
  334,027
  348,894
  363,808
  378,874
  394,195
  409,873
  426,010
Total cash flow (excl. dividends), $m
  11,803
  19,739
  32,492
  49,841
  72,748
  102,181
  139,069
  184,269
  238,525
  302,454
  376,483
  461,024
  556,218
  662,123
  778,693
  905,797
  1,043,245
  1,190,812
  1,348,258
  1,515,348
  1,691,868
  1,877,641
  2,072,532
  2,276,462
  2,489,407
  2,711,406
  2,942,561
  3,183,035
  3,433,054
  3,692,907
Retained Cash Flow (-), $m
  -11,133
  -16,216
  -22,778
  -31,002
  -40,983
  -52,742
  -66,225
  -81,302
  -97,785
  -115,437
  -133,996
  -153,195
  -172,773
  -192,495
  -212,162
  -231,612
  -250,731
  -269,445
  -287,722
  -305,566
  -323,012
  -340,120
  -356,970
  -373,658
  -390,288
  -406,972
  -423,825
  -440,964
  -458,502
  -476,554
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
  224
  358
  553
  826
  1,199
  1,692
  2,326
  3,122
  4,099
  5,275
  6,662
  8,273
  10,115
  12,191
  14,505
  17,056
  19,840
  22,854
  26,093
  29,551
  33,225
  37,107
  41,196
  45,487
  49,979
  54,670
  59,562
  64,657
  69,958
  75,470
Cash available for distribution, $m
  670
  3,523
  9,713
  18,839
  31,766
  49,439
  72,845
  102,966
  140,740
  187,017
  242,487
  307,829
  383,445
  469,627
  566,531
  674,184
  792,514
  921,367
  1,060,536
  1,209,782
  1,368,856
  1,537,521
  1,715,562
  1,902,804
  2,099,119
  2,304,434
  2,518,736
  2,742,071
  2,974,552
  3,216,354
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
  643
  3,225
  8,453
  15,512
  24,622
  35,880
  49,213
  64,356
  80,848
  98,046
  115,153
  131,362
  145,793
  157,662
  166,324
  171,325
  172,438
  169,679
  163,292
  153,726
  141,585
  127,574
  112,440
  96,914
  81,659
  67,232
  54,059
  42,424
  32,470
  24,218
Current shareholders' claim on cash, %
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0
  98.0

Micron Technology, Inc. is engaged in semiconductor systems. The Company's portfolio of memory technologies, including dynamic random-access memory (DRAM), negative-AND (NAND) Flash and NOR Flash are the basis for solid-state drives, modules, multi-chip packages and other system solutions. Its business segments include Compute and Networking Business Unit (CNBU), which includes memory products sold into compute, networking, graphics and cloud server markets; Mobile Business Unit (MBU), which includes memory products sold into smartphone, tablet and other mobile-device markets; Storage Business Unit (SBU), which includes memory products sold into enterprise, client, cloud and removable storage markets, and SBU also includes products sold to Intel through its Intel/Micron Flash Technology (IMFT) joint venture, and Embedded Business Unit (EBU), which includes memory products sold into automotive, industrial, connected home and consumer electronics markets.

FINANCIAL RATIOS  of  Micron Technology (MU)

Valuation Ratios
P/E Ratio 11.1
Price to Sales 2.8
Price to Book 3
Price to Tangible Book
Price to Cash Flow 6.9
Price to Free Cash Flow 16.5
Growth Rates
Sales Growth Rate 63.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -18.6%
Cap. Spend. - 3 Yr. Gr. Rate 8.8%
Financial Strength
Quick Ratio 4
Current Ratio 0
LT Debt to Equity 53.1%
Total Debt to Equity 59.9%
Interest Coverage 12
Management Effectiveness
Return On Assets 17.6%
Ret/ On Assets - 3 Yr. Avg. 10.3%
Return On Total Capital 19.7%
Ret/ On T. Cap. - 3 Yr. Avg. 11.3%
Return On Equity 33.2%
Return On Equity - 3 Yr. Avg. 18.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 41.5%
Gross Margin - 3 Yr. Avg. 31.3%
EBITDA Margin 46.9%
EBITDA Margin - 3 Yr. Avg. 34.9%
Operating Margin 28.7%
Oper. Margin - 3 Yr. Avg. 16.1%
Pre-Tax Margin 25.6%
Pre-Tax Margin - 3 Yr. Avg. 13.1%
Net Profit Margin 25%
Net Profit Margin - 3 Yr. Avg. 13.6%
Effective Tax Rate 2.2%
Eff/ Tax Rate - 3 Yr. Avg. 0.5%
Payout Ratio 0%

MU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MU stock intrinsic value calculation we used $20322 million for the last fiscal year's total revenue generated by Micron Technology. The default revenue input number comes from 2017 income statement of Micron Technology. 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 MU 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 4.3%, whose default value for MU is calculated based on our internal credit rating of Micron Technology, 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 Micron Technology.
    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 MU stock the variable cost ratio is equal to 28.1%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $8945 million in the base year in the intrinsic value calculation for MU 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 5.7% for Micron Technology.

Corporate tax rate of 27% is the nominal tax rate for Micron Technology. 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 MU stock is equal to 1.1%.

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 MU are equal to 89.3%.

Life of production assets of 10 years is the average useful life of capital assets used in Micron Technology 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 MU is equal to -2.7%. 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 - $18621 million for Micron Technology - 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 1089 million for Micron Technology 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 Micron Technology at the current share price and the inputted number of shares is $55.1 billion.

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