Intrinsic value of TransCanada - TRP

Previous Close

$39.76

  Intrinsic Value

$12.66

stock screener

  Rating & Target

str. sell

-68%

Previous close

$39.76

 
Intrinsic value

$12.66

 
Up/down potential

-68%

 
Rating

str. sell

We calculate the intrinsic value of TRP 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 35.0

 

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, %
  13.20
  12.38
  11.64
  10.98
  10.38
  9.84
  9.36
  8.92
  8.53
  8.18
  7.86
  7.57
  7.32
  7.08
  6.88
  6.69
  6.52
  6.37
  6.23
  6.11
  6.00
  5.90
  5.81
  5.73
  5.65
  5.59
  5.53
  5.48
  5.43
  5.39
Revenue, $m
  11,959
  13,440
  15,005
  16,652
  18,380
  20,189
  22,079
  24,048
  26,100
  28,234
  30,453
  32,759
  35,156
  37,646
  40,235
  42,926
  45,724
  48,636
  51,666
  54,822
  58,109
  61,536
  65,110
  68,839
  72,731
  76,795
  81,042
  85,481
  90,121
  94,976
Variable operating expenses, $m
  5,793
  6,368
  6,976
  7,617
  8,288
  8,992
  9,726
  10,491
  11,289
  12,118
  11,836
  12,733
  13,664
  14,632
  15,638
  16,684
  17,772
  18,904
  20,082
  21,308
  22,586
  23,918
  25,307
  26,756
  28,269
  29,849
  31,499
  33,225
  35,028
  36,915
Fixed operating expenses, $m
  2,860
  2,922
  2,987
  3,052
  3,120
  3,188
  3,258
  3,330
  3,403
  3,478
  3,555
  3,633
  3,713
  3,795
  3,878
  3,963
  4,051
  4,140
  4,231
  4,324
  4,419
  4,516
  4,615
  4,717
  4,821
  4,927
  5,035
  5,146
  5,259
  5,375
Total operating expenses, $m
  8,653
  9,290
  9,963
  10,669
  11,408
  12,180
  12,984
  13,821
  14,692
  15,596
  15,391
  16,366
  17,377
  18,427
  19,516
  20,647
  21,823
  23,044
  24,313
  25,632
  27,005
  28,434
  29,922
  31,473
  33,090
  34,776
  36,534
  38,371
  40,287
  42,290
Operating income, $m
  3,307
  4,149
  5,041
  5,983
  6,972
  8,009
  9,094
  10,227
  11,408
  12,637
  15,062
  16,393
  17,778
  19,219
  20,718
  22,278
  23,902
  25,592
  27,354
  29,190
  31,104
  33,102
  35,187
  37,365
  39,641
  42,020
  44,507
  47,110
  49,834
  52,686
EBITDA, $m
  6,292
  7,362
  8,495
  9,690
  10,945
  12,261
  13,637
  15,072
  16,569
  18,127
  19,748
  21,435
  23,189
  25,013
  26,910
  28,884
  30,939
  33,077
  35,305
  37,627
  40,047
  42,573
  45,208
  47,960
  50,834
  53,839
  56,980
  60,265
  63,703
  67,302
Interest expense (income), $m
  1,274
  1,846
  2,191
  2,554
  2,938
  3,342
  3,766
  4,210
  4,674
  5,158
  5,661
  6,185
  6,729
  7,295
  7,883
  8,495
  9,130
  9,790
  10,477
  11,192
  11,936
  12,710
  13,517
  14,358
  15,235
  16,150
  17,105
  18,103
  19,145
  20,234
  21,373
Earnings before tax, $m
  1,461
  1,959
  2,488
  3,045
  3,630
  4,243
  4,884
  5,553
  6,250
  6,976
  8,877
  9,664
  10,483
  11,336
  12,223
  13,148
  14,111
  15,115
  16,162
  17,254
  18,394
  19,585
  20,830
  22,130
  23,491
  24,914
  26,405
  27,965
  29,599
  31,312
Tax expense, $m
  395
  529
  672
  822
  980
  1,146
  1,319
  1,499
  1,687
  1,884
  2,397
  2,609
  2,830
  3,061
  3,300
  3,550
  3,810
  4,081
  4,364
  4,659
  4,967
  5,288
  5,624
  5,975
  6,343
  6,727
  7,129
  7,551
  7,992
  8,454
Net income, $m
  1,067
  1,430
  1,816
  2,223
  2,650
  3,097
  3,565
  4,053
  4,562
  5,093
  6,480
  7,055
  7,653
  8,275
  8,923
  9,598
  10,301
  11,034
  11,798
  12,596
  13,428
  14,297
  15,206
  16,155
  17,148
  18,188
  19,275
  20,414
  21,608
  22,858

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
  76,663
  86,153
  96,183
  106,742
  117,822
  129,418
  141,529
  154,156
  167,305
  180,986
  195,210
  209,993
  225,356
  241,321
  257,914
  275,164
  293,104
  311,767
  331,193
  351,421
  372,495
  394,462
  417,371
  441,272
  466,222
  492,278
  519,500
  547,952
  577,701
  608,818
Adjusted assets (=assets-cash), $m
  76,663
  86,153
  96,183
  106,742
  117,822
  129,418
  141,529
  154,156
  167,305
  180,986
  195,210
  209,993
  225,356
  241,321
  257,914
  275,164
  293,104
  311,767
  331,193
  351,421
  372,495
  394,462
  417,371
  441,272
  466,222
  492,278
  519,500
  547,952
  577,701
  608,818
Revenue / Adjusted assets
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
  0.156
Average production assets, $m
  55,216
  62,052
  69,276
  76,881
  84,862
  93,214
  101,936
  111,031
  120,502
  130,355
  140,600
  151,248
  162,313
  173,812
  185,763
  198,188
  211,108
  224,551
  238,542
  253,112
  268,290
  284,112
  300,612
  317,827
  335,798
  354,564
  374,171
  394,664
  416,091
  438,502
Working capital, $m
  -1,471
  -1,653
  -1,846
  -2,048
  -2,261
  -2,483
  -2,716
  -2,958
  -3,210
  -3,473
  -3,746
  -4,029
  -4,324
  -4,630
  -4,949
  -5,280
  -5,624
  -5,982
  -6,355
  -6,743
  -7,147
  -7,569
  -8,009
  -8,467
  -8,946
  -9,446
  -9,968
  -10,514
  -11,085
  -11,682
Total debt, $m
  40,567
  47,296
  54,407
  61,893
  69,749
  77,970
  86,557
  95,510
  104,832
  114,532
  124,617
  135,098
  145,990
  157,310
  169,074
  181,304
  194,023
  207,256
  221,028
  235,370
  250,312
  265,887
  282,129
  299,075
  316,765
  335,238
  354,538
  374,711
  395,803
  417,865
Total liabilities, $m
  54,354
  61,083
  68,194
  75,680
  83,536
  91,757
  100,344
  109,297
  118,619
  128,319
  138,404
  148,885
  159,778
  171,097
  182,861
  195,092
  207,810
  221,043
  234,816
  249,157
  264,099
  279,674
  295,916
  312,862
  330,552
  349,025
  368,326
  388,498
  409,590
  431,652
Total equity, $m
  22,309
  25,071
  27,989
  31,062
  34,286
  37,661
  41,185
  44,859
  48,686
  52,667
  56,806
  61,108
  65,579
  70,224
  75,053
  80,073
  85,293
  90,724
  96,377
  102,263
  108,396
  114,789
  121,455
  128,410
  135,671
  143,253
  151,175
  159,454
  168,111
  177,166
Total liabilities and equity, $m
  76,663
  86,154
  96,183
  106,742
  117,822
  129,418
  141,529
  154,156
  167,305
  180,986
  195,210
  209,993
  225,357
  241,321
  257,914
  275,165
  293,103
  311,767
  331,193
  351,420
  372,495
  394,463
  417,371
  441,272
  466,223
  492,278
  519,501
  547,952
  577,701
  608,818
Debt-to-equity ratio
  1.820
  1.890
  1.940
  1.990
  2.030
  2.070
  2.100
  2.130
  2.150
  2.170
  2.190
  2.210
  2.230
  2.240
  2.250
  2.260
  2.270
  2.280
  2.290
  2.300
  2.310
  2.320
  2.320
  2.330
  2.330
  2.340
  2.350
  2.350
  2.350
  2.360
Adjusted equity ratio
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291
  0.291

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,067
  1,430
  1,816
  2,223
  2,650
  3,097
  3,565
  4,053
  4,562
  5,093
  6,480
  7,055
  7,653
  8,275
  8,923
  9,598
  10,301
  11,034
  11,798
  12,596
  13,428
  14,297
  15,206
  16,155
  17,148
  18,188
  19,275
  20,414
  21,608
  22,858
Depreciation, amort., depletion, $m
  2,985
  3,213
  3,454
  3,707
  3,973
  4,252
  4,542
  4,845
  5,161
  5,490
  4,687
  5,042
  5,410
  5,794
  6,192
  6,606
  7,037
  7,485
  7,951
  8,437
  8,943
  9,470
  10,020
  10,594
  11,193
  11,819
  12,472
  13,155
  13,870
  14,617
Funds from operations, $m
  4,052
  4,643
  5,269
  5,930
  6,623
  7,349
  8,107
  8,899
  9,724
  10,582
  11,167
  12,096
  13,063
  14,069
  15,115
  16,204
  17,338
  18,519
  19,750
  21,033
  22,371
  23,768
  25,226
  26,749
  28,342
  30,006
  31,748
  33,570
  35,477
  37,475
Change in working capital, $m
  -172
  -182
  -192
  -203
  -213
  -223
  -232
  -242
  -252
  -262
  -273
  -284
  -295
  -306
  -318
  -331
  -344
  -358
  -373
  -388
  -404
  -422
  -440
  -459
  -479
  -500
  -522
  -546
  -571
  -597
Cash from operations, $m
  4,223
  4,825
  5,462
  6,132
  6,836
  7,571
  8,340
  9,141
  9,976
  10,845
  11,440
  12,380
  13,358
  14,375
  15,434
  16,535
  17,682
  18,877
  20,122
  21,421
  22,775
  24,189
  25,666
  27,208
  28,820
  30,506
  32,270
  34,116
  36,048
  38,072
Maintenance CAPEX, $m
  -1,626
  -1,841
  -2,068
  -2,309
  -2,563
  -2,829
  -3,107
  -3,398
  -3,701
  -4,017
  -4,345
  -4,687
  -5,042
  -5,410
  -5,794
  -6,192
  -6,606
  -7,037
  -7,485
  -7,951
  -8,437
  -8,943
  -9,470
  -10,020
  -10,594
  -11,193
  -11,819
  -12,472
  -13,155
  -13,870
New CAPEX, $m
  -6,433
  -6,836
  -7,224
  -7,605
  -7,980
  -8,352
  -8,723
  -9,095
  -9,471
  -9,853
  -10,245
  -10,648
  -11,065
  -11,499
  -11,951
  -12,424
  -12,921
  -13,442
  -13,991
  -14,569
  -15,179
  -15,822
  -16,500
  -17,215
  -17,970
  -18,767
  -19,607
  -20,493
  -21,427
  -22,412
Cash from investing activities, $m
  -8,059
  -8,677
  -9,292
  -9,914
  -10,543
  -11,181
  -11,830
  -12,493
  -13,172
  -13,870
  -14,590
  -15,335
  -16,107
  -16,909
  -17,745
  -18,616
  -19,527
  -20,479
  -21,476
  -22,520
  -23,616
  -24,765
  -25,970
  -27,235
  -28,564
  -29,960
  -31,426
  -32,965
  -34,582
  -36,282
Free cash flow, $m
  -3,836
  -3,852
  -3,831
  -3,782
  -3,707
  -3,609
  -3,490
  -3,351
  -3,196
  -3,025
  -3,150
  -2,955
  -2,749
  -2,534
  -2,311
  -2,081
  -1,845
  -1,602
  -1,354
  -1,100
  -841
  -576
  -305
  -28
  256
  546
  844
  1,151
  1,466
  1,790
Issuance/(repayment) of debt, $m
  6,387
  6,729
  7,111
  7,486
  7,856
  8,222
  8,586
  8,953
  9,323
  9,699
  10,085
  10,482
  10,892
  11,319
  11,764
  12,230
  12,719
  13,232
  13,773
  14,342
  14,942
  15,575
  16,242
  16,946
  17,689
  18,473
  19,300
  20,173
  21,092
  22,061
Issuance/(repurchase) of shares, $m
  1,573
  1,332
  1,103
  850
  574
  277
  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  
  7,960
  8,061
  8,214
  8,336
  8,430
  8,499
  8,586
  8,953
  9,323
  9,699
  10,085
  10,482
  10,892
  11,319
  11,764
  12,230
  12,719
  13,232
  13,773
  14,342
  14,942
  15,575
  16,242
  16,946
  17,689
  18,473
  19,300
  20,173
  21,092
  22,061
Total cash flow (excl. dividends), $m
  4,123
  4,209
  4,384
  4,554
  4,723
  4,889
  5,096
  5,601
  6,127
  6,674
  6,935
  7,527
  8,143
  8,785
  9,453
  10,149
  10,874
  11,630
  12,419
  13,242
  14,101
  14,999
  15,937
  16,919
  17,945
  19,020
  20,145
  21,323
  22,558
  23,852
Retained Cash Flow (-), $m
  -2,640
  -2,762
  -2,919
  -3,073
  -3,224
  -3,374
  -3,524
  -3,675
  -3,826
  -3,981
  -4,139
  -4,302
  -4,471
  -4,646
  -4,829
  -5,020
  -5,220
  -5,431
  -5,653
  -5,886
  -6,133
  -6,392
  -6,666
  -6,955
  -7,260
  -7,582
  -7,922
  -8,280
  -8,657
  -9,055
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
  1,484
  1,448
  1,465
  1,482
  1,498
  1,515
  1,572
  1,927
  2,300
  2,693
  2,795
  3,225
  3,673
  4,139
  4,625
  5,129
  5,654
  6,199
  6,766
  7,355
  7,968
  8,607
  9,271
  9,963
  10,685
  11,438
  12,223
  13,044
  13,901
  14,797
Discount rate, %
  9.50
  9.98
  10.47
  11.00
  11.55
  12.12
  12.73
  13.37
  14.04
  14.74
  15.47
  16.25
  17.06
  17.91
  18.81
  19.75
  20.74
  21.77
  22.86
  24.01
  25.21
  26.47
  27.79
  29.18
  30.64
  32.17
  33.78
  35.47
  37.24
  39.10
PV of cash for distribution, $m
  1,355
  1,197
  1,086
  976
  868
  762
  680
  706
  705
  681
  574
  530
  474
  412
  349
  287
  230
  179
  135
  99
  71
  49
  33
  21
  13
  8
  5
  3
  1
  1
Current shareholders' claim on cash, %
  95.7
  92.6
  90.4
  88.9
  87.9
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5
  87.5

TransCanada Corporation is an energy infrastructure company. The Company is engaged in the development and operation of North American energy infrastructure, including natural gas and liquids pipelines, power generation and natural gas storage facilities. Its segments include Canadian Natural Gas Pipelines, U.S. Natural Gas Pipelines, Mexico Natural Gas Pipelines, Liquids Pipelines and Energy. The Company operates in three businesses: Natural Gas Pipelines, Liquids Pipelines and Energy. The Natural Gas Pipelines and Liquids Pipelines segments principally consist of its respective natural gas and liquids pipelines in Canada, the United States and Mexico, as well as its regulated natural gas storage operations in the United States. The Energy segment includes its power operations and the non-regulated natural gas storage business in Canada. TransCanada PipeLines Limited (TCPL) is its principal operating subsidiary.

FINANCIAL RATIOS  of  TransCanada (TRP)

Valuation Ratios
P/E Ratio 199.7
Price to Sales 3.7
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 9.2
Price to Free Cash Flow -199.7
Growth Rates
Sales Growth Rate 10.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 19.7%
Cap. Spend. - 3 Yr. Gr. Rate 3.5%
Financial Strength
Quick Ratio 0
Current Ratio 0.6
LT Debt to Equity 174.1%
Total Debt to Equity 184.9%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. 2.2%
Return On Total Capital 0.4%
Ret/ On T. Cap. - 3 Yr. Avg. 0.7%
Return On Equity 1.1%
Return On Equity - 3 Yr. Avg. 1.5%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 52.1%
Gross Margin - 3 Yr. Avg. 52.1%
EBITDA Margin 36%
EBITDA Margin - 3 Yr. Avg. 35.9%
Operating Margin 21.1%
Oper. Margin - 3 Yr. Avg. 17.2%
Pre-Tax Margin 6.7%
Pre-Tax Margin - 3 Yr. Avg. 8.2%
Net Profit Margin 1.9%
Net Profit Margin - 3 Yr. Avg. 3.3%
Effective Tax Rate 42.1%
Eff/ Tax Rate - 3 Yr. Avg. 22.8%
Payout Ratio 661%

TRP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRP stock intrinsic value calculation we used $10564.8075412 million for the last fiscal year's total revenue generated by TransCanada. The default revenue input number comes from 0001 income statement of TransCanada. 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 TRP stock valuation model: a) initial revenue growth rate of 13.2% 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 9.5%, whose default value for TRP is calculated based on our internal credit rating of TransCanada, 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 TransCanada.
    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 TRP stock the variable cost ratio is equal to 49.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $2798 million in the base year in the intrinsic value calculation for TRP 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 TransCanada.

Corporate tax rate of 27% is the nominal tax rate for TransCanada. 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 TRP 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 TRP are equal to 461.7%.

Life of production assets of 33.9 years is the average useful life of capital assets used in TransCanada 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 TRP is equal to -12.3%. 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 - $19669.2851532 million for TransCanada - 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 881 million for TransCanada 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 TransCanada at the current share price and the inputted number of shares is $35.0 billion.

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