Intrinsic value of AT&T - T

Previous Close

$30.14

  Intrinsic Value

$43.97

stock screener

  Rating & Target

buy

+46%

Previous close

$30.14

 
Intrinsic value

$43.97

 
Up/down potential

+46%

 
Rating

buy

We calculate the intrinsic value of T 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 218.9

 

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, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  163,757
  167,523
  171,829
  176,662
  182,018
  187,895
  194,294
  201,220
  208,683
  216,692
  225,260
  234,402
  244,136
  254,481
  265,459
  277,092
  289,406
  302,428
  316,188
  330,716
  346,046
  362,212
  379,252
  397,207
  416,117
  436,026
  456,982
  479,034
  502,234
  526,636
Variable operating expenses, $m
  138,918
  141,607
  144,682
  148,134
  151,959
  156,155
  160,725
  165,672
  171,001
  176,720
  160,867
  167,395
  174,347
  181,735
  189,574
  197,882
  206,676
  215,976
  225,802
  236,177
  247,125
  258,670
  270,839
  283,661
  297,165
  311,383
  326,349
  342,097
  358,665
  376,091
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
  138,918
  141,607
  144,682
  148,134
  151,959
  156,155
  160,725
  165,672
  171,001
  176,720
  160,867
  167,395
  174,347
  181,735
  189,574
  197,882
  206,676
  215,976
  225,802
  236,177
  247,125
  258,670
  270,839
  283,661
  297,165
  311,383
  326,349
  342,097
  358,665
  376,091
Operating income, $m
  24,839
  25,916
  27,147
  28,528
  30,059
  31,739
  33,569
  35,549
  37,682
  39,971
  64,393
  67,006
  69,789
  72,746
  75,884
  79,210
  82,730
  86,453
  90,386
  94,539
  98,921
  103,542
  108,414
  113,546
  118,952
  124,643
  130,633
  136,937
  143,569
  150,545
EBITDA, $m
  63,729
  65,195
  66,871
  68,752
  70,836
  73,123
  75,613
  78,309
  81,213
  84,330
  87,664
  91,222
  95,011
  99,037
  103,309
  107,836
  112,628
  117,696
  123,051
  128,705
  134,671
  140,962
  147,594
  154,581
  161,940
  169,689
  177,844
  186,426
  195,455
  204,951
Interest expense (income), $m
  5,696
  8,875
  9,172
  9,546
  9,974
  10,454
  10,986
  11,570
  12,206
  12,894
  13,635
  14,431
  15,282
  16,190
  17,157
  18,185
  19,275
  20,431
  21,654
  22,948
  24,315
  25,758
  27,281
  28,887
  30,580
  32,363
  34,242
  36,220
  38,302
  40,492
  42,797
Earnings before tax, $m
  15,965
  16,744
  17,600
  18,554
  19,605
  20,753
  21,999
  23,343
  24,788
  26,336
  49,962
  51,725
  53,599
  55,589
  57,699
  59,934
  62,299
  64,798
  67,438
  70,224
  73,163
  76,261
  79,527
  82,966
  86,588
  90,401
  94,414
  98,636
  103,077
  107,748
Tax expense, $m
  4,310
  4,521
  4,752
  5,010
  5,293
  5,603
  5,940
  6,303
  6,693
  7,111
  13,490
  13,966
  14,472
  15,009
  15,579
  16,182
  16,821
  17,496
  18,208
  18,960
  19,754
  20,591
  21,472
  22,401
  23,379
  24,408
  25,492
  26,632
  27,831
  29,092
Net income, $m
  11,654
  12,223
  12,848
  13,545
  14,312
  15,150
  16,059
  17,040
  18,095
  19,225
  36,472
  37,759
  39,127
  40,580
  42,121
  43,752
  45,478
  47,303
  49,230
  51,263
  53,409
  55,671
  58,054
  60,565
  63,209
  65,993
  68,922
  72,004
  75,246
  78,656

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
  444,992
  455,226
  466,926
  480,060
  494,614
  510,583
  527,972
  546,795
  567,073
  588,836
  612,118
  636,962
  663,413
  691,524
  721,355
  752,967
  786,429
  821,816
  859,207
  898,685
  940,341
  984,272
  1,030,577
  1,079,366
  1,130,751
  1,184,854
  1,241,800
  1,301,723
  1,364,766
  1,431,076
Adjusted assets (=assets-cash), $m
  444,992
  455,226
  466,926
  480,060
  494,614
  510,583
  527,972
  546,795
  567,073
  588,836
  612,118
  636,962
  663,413
  691,524
  721,355
  752,967
  786,429
  821,816
  859,207
  898,685
  940,341
  984,272
  1,030,577
  1,079,366
  1,130,751
  1,184,854
  1,241,800
  1,301,723
  1,364,766
  1,431,076
Revenue / Adjusted assets
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
  0.368
Average production assets, $m
  240,231
  245,757
  252,073
  259,163
  267,021
  275,641
  285,029
  295,190
  306,138
  317,887
  330,456
  343,868
  358,147
  373,324
  389,428
  406,494
  424,559
  443,662
  463,848
  485,160
  507,649
  531,365
  556,363
  582,702
  610,443
  639,650
  670,393
  702,743
  736,777
  772,575
Working capital, $m
  -14,574
  -14,910
  -15,293
  -15,723
  -16,200
  -16,723
  -17,292
  -17,909
  -18,573
  -19,286
  -20,048
  -20,862
  -21,728
  -22,649
  -23,626
  -24,661
  -25,757
  -26,916
  -28,141
  -29,434
  -30,798
  -32,237
  -33,753
  -35,351
  -37,034
  -38,806
  -40,671
  -42,634
  -44,699
  -46,871
Total debt, $m
  169,852
  176,781
  184,702
  193,594
  203,447
  214,258
  226,030
  238,773
  252,502
  267,235
  282,997
  299,816
  317,723
  336,755
  356,950
  378,352
  401,006
  424,963
  450,276
  477,003
  505,204
  534,945
  566,294
  599,324
  634,112
  670,739
  709,291
  749,860
  792,540
  837,431
Total liabilities, $m
  301,259
  308,188
  316,109
  325,001
  334,854
  345,665
  357,437
  370,180
  383,909
  398,642
  414,404
  431,223
  449,130
  468,162
  488,357
  509,759
  532,413
  556,370
  581,683
  608,410
  636,611
  666,352
  697,701
  730,731
  765,519
  802,146
  840,698
  881,267
  923,947
  968,838
Total equity, $m
  143,732
  147,038
  150,817
  155,060
  159,760
  164,918
  170,535
  176,615
  183,165
  190,194
  197,714
  205,739
  214,282
  223,362
  232,998
  243,208
  254,017
  265,447
  277,524
  290,275
  303,730
  317,920
  332,876
  348,635
  365,233
  382,708
  401,101
  420,457
  440,819
  462,237
Total liabilities and equity, $m
  444,991
  455,226
  466,926
  480,061
  494,614
  510,583
  527,972
  546,795
  567,074
  588,836
  612,118
  636,962
  663,412
  691,524
  721,355
  752,967
  786,430
  821,817
  859,207
  898,685
  940,341
  984,272
  1,030,577
  1,079,366
  1,130,752
  1,184,854
  1,241,799
  1,301,724
  1,364,766
  1,431,075
Debt-to-equity ratio
  1.180
  1.200
  1.220
  1.250
  1.270
  1.300
  1.330
  1.350
  1.380
  1.410
  1.430
  1.460
  1.480
  1.510
  1.530
  1.560
  1.580
  1.600
  1.620
  1.640
  1.660
  1.680
  1.700
  1.720
  1.740
  1.750
  1.770
  1.780
  1.800
  1.810
Adjusted equity ratio
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323
  0.323

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  11,654
  12,223
  12,848
  13,545
  14,312
  15,150
  16,059
  17,040
  18,095
  19,225
  36,472
  37,759
  39,127
  40,580
  42,121
  43,752
  45,478
  47,303
  49,230
  51,263
  53,409
  55,671
  58,054
  60,565
  63,209
  65,993
  68,922
  72,004
  75,246
  78,656
Depreciation, amort., depletion, $m
  38,890
  39,279
  39,724
  40,223
  40,777
  41,384
  42,045
  42,761
  43,532
  44,359
  23,272
  24,216
  25,222
  26,290
  27,424
  28,626
  29,898
  31,244
  32,665
  34,166
  35,750
  37,420
  39,181
  41,035
  42,989
  45,046
  47,211
  49,489
  51,886
  54,407
Funds from operations, $m
  50,544
  51,502
  52,572
  53,768
  55,089
  56,534
  58,104
  59,801
  61,627
  63,584
  59,744
  61,975
  64,349
  66,870
  69,545
  72,378
  75,377
  78,547
  81,895
  85,430
  89,159
  93,091
  97,235
  101,601
  106,198
  111,038
  116,133
  121,493
  127,132
  133,062
Change in working capital, $m
  -286
  -335
  -383
  -430
  -477
  -523
  -570
  -616
  -664
  -713
  -763
  -814
  -866
  -921
  -977
  -1,035
  -1,096
  -1,159
  -1,225
  -1,293
  -1,364
  -1,439
  -1,517
  -1,598
  -1,683
  -1,772
  -1,865
  -1,963
  -2,065
  -2,172
Cash from operations, $m
  50,830
  51,838
  52,956
  54,198
  55,565
  57,057
  58,673
  60,417
  62,291
  64,297
  60,507
  62,789
  65,215
  67,791
  70,522
  73,414
  76,473
  79,706
  83,120
  86,723
  90,523
  94,530
  98,751
  103,199
  107,881
  112,810
  117,998
  123,456
  129,196
  135,234
Maintenance CAPEX, $m
  -16,585
  -16,918
  -17,307
  -17,752
  -18,251
  -18,804
  -19,411
  -20,072
  -20,788
  -21,559
  -22,386
  -23,272
  -24,216
  -25,222
  -26,290
  -27,424
  -28,626
  -29,898
  -31,244
  -32,665
  -34,166
  -35,750
  -37,420
  -39,181
  -41,035
  -42,989
  -45,046
  -47,211
  -49,489
  -51,886
New CAPEX, $m
  -4,723
  -5,525
  -6,316
  -7,091
  -7,857
  -8,621
  -9,387
  -10,162
  -10,947
  -11,749
  -12,569
  -13,412
  -14,280
  -15,176
  -16,104
  -17,066
  -18,065
  -19,104
  -20,185
  -21,313
  -22,488
  -23,716
  -24,998
  -26,339
  -27,741
  -29,207
  -30,743
  -32,350
  -34,034
  -35,798
Cash from investing activities, $m
  -21,308
  -22,443
  -23,623
  -24,843
  -26,108
  -27,425
  -28,798
  -30,234
  -31,735
  -33,308
  -34,955
  -36,684
  -38,496
  -40,398
  -42,394
  -44,490
  -46,691
  -49,002
  -51,429
  -53,978
  -56,654
  -59,466
  -62,418
  -65,520
  -68,776
  -72,196
  -75,789
  -79,561
  -83,523
  -87,684
Free cash flow, $m
  29,522
  29,395
  29,333
  29,356
  29,457
  29,632
  29,875
  30,183
  30,555
  30,989
  25,551
  26,105
  26,719
  27,393
  28,128
  28,923
  29,781
  30,703
  31,690
  32,745
  33,868
  35,064
  36,333
  37,679
  39,105
  40,614
  42,209
  43,895
  45,674
  47,551
Issuance/(repayment) of debt, $m
  5,506
  6,929
  7,920
  8,892
  9,853
  10,811
  11,772
  12,743
  13,728
  14,733
  15,762
  16,819
  17,907
  19,032
  20,195
  21,401
  22,654
  23,957
  25,313
  26,727
  28,201
  29,741
  31,349
  33,030
  34,788
  36,627
  38,552
  40,568
  42,680
  44,892
Issuance/(repurchase) of shares, $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 from financing (excl. dividends), $m  
  5,506
  6,929
  7,920
  8,892
  9,853
  10,811
  11,772
  12,743
  13,728
  14,733
  15,762
  16,819
  17,907
  19,032
  20,195
  21,401
  22,654
  23,957
  25,313
  26,727
  28,201
  29,741
  31,349
  33,030
  34,788
  36,627
  38,552
  40,568
  42,680
  44,892
Total cash flow (excl. dividends), $m
  35,028
  36,323
  37,253
  38,248
  39,310
  40,442
  41,647
  42,926
  44,284
  45,723
  41,313
  42,924
  44,627
  46,425
  48,323
  50,325
  52,436
  54,660
  57,004
  59,472
  62,070
  64,804
  67,682
  70,709
  73,893
  77,241
  80,762
  84,463
  88,353
  92,442
Retained Cash Flow (-), $m
  -2,871
  -3,306
  -3,779
  -4,242
  -4,701
  -5,158
  -5,617
  -6,080
  -6,550
  -7,029
  -7,520
  -8,024
  -8,544
  -9,080
  -9,635
  -10,211
  -10,808
  -11,430
  -12,077
  -12,752
  -13,455
  -14,189
  -14,957
  -15,759
  -16,597
  -17,475
  -18,394
  -19,355
  -20,363
  -21,418
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
  32,157
  33,018
  33,474
  34,006
  34,609
  35,284
  36,030
  36,847
  37,734
  38,693
  33,793
  34,900
  36,083
  37,345
  38,688
  40,114
  41,627
  43,230
  44,927
  46,720
  48,615
  50,615
  52,725
  54,950
  57,296
  59,766
  62,368
  65,108
  67,991
  71,024
Discount rate, %
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
  30,394
  29,336
  27,794
  26,222
  24,619
  22,988
  21,336
  19,671
  18,004
  16,348
  12,519
  11,218
  9,951
  8,733
  7,575
  6,490
  5,486
  4,572
  3,753
  3,031
  2,406
  1,876
  1,434
  1,074
  788
  564
  395
  269
  179
  115
Current shareholders' claim on cash, %
  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
  100.0

AT&T Inc. is a holding company. The Company is a provider of communications and digital entertainment services in the United States and the world. The Company operates through four segments: Business Solutions, Entertainment Group, Consumer Mobility and International. The Company offers its services and products to consumers in the United States, Mexico and Latin America and to businesses and other providers of telecommunications services worldwide. It also owns and operates three regional TV sports networks, and retains non-controlling interests in another regional sports network and a network dedicated to game-related programming, as well as Internet interactive game playing. Its services and products include wireless communications, data/broadband and Internet services, digital video services, local and long-distance telephone services, telecommunications equipment, managed networking, and wholesale services. Its subsidiaries include AT&T Mobility and SKY Brasil Servicos Ltda.

FINANCIAL RATIOS  of  AT&T (T)

Valuation Ratios
P/E Ratio 14.3
Price to Sales 1.1
Price to Book 1.5
Price to Tangible Book
Price to Cash Flow 4.7
Price to Free Cash Flow 10.4
Growth Rates
Sales Growth Rate 11.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 12%
Cap. Spend. - 3 Yr. Gr. Rate 0.5%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity 92.3%
Total Debt to Equity 100.3%
Interest Coverage 4
Management Effectiveness
Return On Assets 4.2%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 5.2%
Ret/ On T. Cap. - 3 Yr. Avg. 5.1%
Return On Equity 10.6%
Return On Equity - 3 Yr. Avg. 10.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 53.1%
Gross Margin - 3 Yr. Avg. 54%
EBITDA Margin 31.4%
EBITDA Margin - 3 Yr. Avg. 28.4%
Operating Margin 14.9%
Oper. Margin - 3 Yr. Avg. 13.7%
Pre-Tax Margin 12.1%
Pre-Tax Margin - 3 Yr. Avg. 11.3%
Net Profit Margin 7.9%
Net Profit Margin - 3 Yr. Avg. 7.3%
Effective Tax Rate 32.7%
Eff/ Tax Rate - 3 Yr. Avg. 33.8%
Payout Ratio 90.9%

T stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the T stock intrinsic value calculation we used $160546 million for the last fiscal year's total revenue generated by AT&T. The default revenue input number comes from 0001 income statement of AT&T. 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 T stock valuation model: a) initial revenue growth rate of 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 5.8%, whose default value for T is calculated based on our internal credit rating of AT&T, 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 AT&T.
    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 T stock the variable cost ratio is equal to 85.1%.

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 T 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 AT&T.

Corporate tax rate of 27% is the nominal tax rate for AT&T. 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 T 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 T are equal to 146.7%.

Life of production assets of 14.2 years is the average useful life of capital assets used in AT&T 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 T is equal to -8.9%. 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 - $140861 million for AT&T - 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 7262 million for AT&T 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 AT&T at the current share price and the inputted number of shares is $218.9 billion.

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