Intrinsic value of Verizon Communications - VZ

Previous Close

$54.27

  Intrinsic Value

$50.64

stock screener

  Rating & Target

hold

-7%

Previous close

$54.27

 
Intrinsic value

$50.64

 
Up/down potential

-7%

 
Rating

hold

We calculate the intrinsic value of VZ 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 221.6

 

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, %
  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
  128,555
  131,511
  134,891
  138,686
  142,890
  147,504
  152,527
  157,965
  163,823
  170,110
  176,836
  184,013
  191,655
  199,776
  208,394
  217,526
  227,193
  237,416
  248,218
  259,623
  271,657
  284,349
  297,726
  311,821
  326,665
  342,295
  358,746
  376,058
  394,270
  413,427
Variable operating expenses, $m
  100,660
  102,681
  104,991
  107,585
  110,459
  113,613
  117,047
  120,764
  124,768
  129,066
  120,880
  125,786
  131,010
  136,561
  142,452
  148,695
  155,303
  162,291
  169,675
  177,471
  185,697
  194,372
  203,517
  213,151
  223,299
  233,983
  245,228
  257,062
  269,512
  282,606
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
  100,660
  102,681
  104,991
  107,585
  110,459
  113,613
  117,047
  120,764
  124,768
  129,066
  120,880
  125,786
  131,010
  136,561
  142,452
  148,695
  155,303
  162,291
  169,675
  177,471
  185,697
  194,372
  203,517
  213,151
  223,299
  233,983
  245,228
  257,062
  269,512
  282,606
Operating income, $m
  27,895
  28,831
  29,900
  31,101
  32,431
  33,891
  35,481
  37,201
  39,055
  41,044
  55,956
  58,227
  60,645
  63,215
  65,942
  68,832
  71,891
  75,126
  78,544
  82,153
  85,960
  89,976
  94,209
  98,669
  103,367
  108,312
  113,518
  118,996
  124,759
  130,821
EBITDA, $m
  62,301
  63,734
  65,372
  67,211
  69,249
  71,485
  73,919
  76,554
  79,394
  82,440
  85,700
  89,178
  92,882
  96,817
  100,994
  105,420
  110,105
  115,059
  120,294
  125,821
  131,653
  137,804
  144,287
  151,118
  158,312
  165,886
  173,859
  182,249
  191,075
  200,359
Interest expense (income), $m
  4,085
  6,323
  6,552
  6,823
  7,133
  7,481
  7,866
  8,289
  8,750
  9,248
  9,785
  10,362
  10,979
  11,637
  12,337
  13,082
  13,872
  14,710
  15,596
  16,533
  17,524
  18,569
  19,673
  20,836
  22,063
  23,355
  24,716
  26,150
  27,658
  29,245
  30,915
Earnings before tax, $m
  21,572
  22,279
  23,077
  23,968
  24,950
  26,025
  27,191
  28,451
  29,807
  31,259
  45,594
  47,249
  49,009
  50,878
  52,860
  54,960
  57,181
  59,530
  62,010
  64,629
  67,391
  70,304
  73,373
  76,606
  80,011
  83,596
  87,368
  91,338
  95,514
  99,905
Tax expense, $m
  5,824
  6,015
  6,231
  6,471
  6,737
  7,027
  7,342
  7,682
  8,048
  8,440
  12,310
  12,757
  13,232
  13,737
  14,272
  14,839
  15,439
  16,073
  16,743
  17,450
  18,196
  18,982
  19,811
  20,684
  21,603
  22,571
  23,589
  24,661
  25,789
  26,974
Net income, $m
  15,747
  16,264
  16,846
  17,497
  18,214
  18,998
  19,850
  20,770
  21,759
  22,819
  33,284
  34,491
  35,776
  37,141
  38,588
  40,121
  41,742
  43,457
  45,268
  47,179
  49,196
  51,322
  53,562
  55,923
  58,408
  61,025
  63,779
  66,677
  69,725
  72,931

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
  262,356
  268,391
  275,288
  283,032
  291,613
  301,028
  311,280
  322,377
  334,333
  347,164
  360,890
  375,537
  391,132
  407,706
  425,294
  443,931
  463,660
  484,523
  506,568
  529,843
  554,403
  580,303
  607,604
  636,369
  666,664
  698,562
  732,136
  767,465
  804,634
  843,728
Adjusted assets (=assets-cash), $m
  262,356
  268,391
  275,288
  283,032
  291,613
  301,028
  311,280
  322,377
  334,333
  347,164
  360,890
  375,537
  391,132
  407,706
  425,294
  443,931
  463,660
  484,523
  506,568
  529,843
  554,403
  580,303
  607,604
  636,369
  666,664
  698,562
  732,136
  767,465
  804,634
  843,728
Revenue / Adjusted assets
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
  0.490
Average production assets, $m
  216,229
  221,202
  226,887
  233,269
  240,342
  248,101
  256,551
  265,697
  275,550
  286,125
  297,439
  309,510
  322,363
  336,023
  350,518
  365,879
  382,139
  399,334
  417,503
  436,686
  456,928
  478,274
  500,775
  524,482
  549,451
  575,741
  603,412
  632,529
  663,163
  695,384
Working capital, $m
  -20,569
  -21,042
  -21,583
  -22,190
  -22,862
  -23,601
  -24,404
  -25,274
  -26,212
  -27,218
  -28,294
  -29,442
  -30,665
  -31,964
  -33,343
  -34,804
  -36,351
  -37,987
  -39,715
  -41,540
  -43,465
  -45,496
  -47,636
  -49,891
  -52,266
  -54,767
  -57,399
  -60,169
  -63,083
  -66,148
Total debt, $m
  121,329
  126,349
  132,088
  138,531
  145,670
  153,503
  162,033
  171,266
  181,213
  191,888
  203,309
  215,495
  228,470
  242,260
  256,892
  272,399
  288,813
  306,171
  324,512
  343,878
  364,311
  385,860
  408,574
  432,507
  457,713
  484,251
  512,185
  541,579
  572,503
  605,030
Total liabilities, $m
  218,281
  223,301
  229,040
  235,483
  242,622
  250,455
  258,985
  268,218
  278,165
  288,840
  300,261
  312,447
  325,422
  339,212
  353,844
  369,351
  385,765
  403,123
  421,464
  440,830
  461,263
  482,812
  505,526
  529,459
  554,665
  581,203
  609,137
  638,531
  669,455
  701,982
Total equity, $m
  44,076
  45,090
  46,248
  47,549
  48,991
  50,573
  52,295
  54,159
  56,168
  58,323
  60,630
  63,090
  65,710
  68,495
  71,449
  74,580
  77,895
  81,400
  85,103
  89,014
  93,140
  97,491
  102,077
  106,910
  112,000
  117,358
  122,999
  128,934
  135,178
  141,746
Total liabilities and equity, $m
  262,357
  268,391
  275,288
  283,032
  291,613
  301,028
  311,280
  322,377
  334,333
  347,163
  360,891
  375,537
  391,132
  407,707
  425,293
  443,931
  463,660
  484,523
  506,567
  529,844
  554,403
  580,303
  607,603
  636,369
  666,665
  698,561
  732,136
  767,465
  804,633
  843,728
Debt-to-equity ratio
  2.750
  2.800
  2.860
  2.910
  2.970
  3.040
  3.100
  3.160
  3.230
  3.290
  3.350
  3.420
  3.480
  3.540
  3.600
  3.650
  3.710
  3.760
  3.810
  3.860
  3.910
  3.960
  4.000
  4.050
  4.090
  4.130
  4.160
  4.200
  4.240
  4.270
Adjusted equity ratio
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168
  0.168

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15,747
  16,264
  16,846
  17,497
  18,214
  18,998
  19,850
  20,770
  21,759
  22,819
  33,284
  34,491
  35,776
  37,141
  38,588
  40,121
  41,742
  43,457
  45,268
  47,179
  49,196
  51,322
  53,562
  55,923
  58,408
  61,025
  63,779
  66,677
  69,725
  72,931
Depreciation, amort., depletion, $m
  34,406
  34,904
  35,472
  36,111
  36,818
  37,594
  38,439
  39,353
  40,339
  41,396
  29,744
  30,951
  32,236
  33,602
  35,052
  36,588
  38,214
  39,933
  41,750
  43,669
  45,693
  47,827
  50,078
  52,448
  54,945
  57,574
  60,341
  63,253
  66,316
  69,538
Funds from operations, $m
  50,154
  51,167
  52,319
  53,607
  55,032
  56,592
  58,288
  60,123
  62,097
  64,215
  63,028
  65,443
  68,013
  70,743
  73,640
  76,708
  79,956
  83,390
  87,018
  90,848
  94,888
  99,149
  103,640
  108,371
  113,353
  118,599
  124,120
  129,930
  136,041
  142,469
Change in working capital, $m
  -403
  -473
  -541
  -607
  -673
  -738
  -804
  -870
  -937
  -1,006
  -1,076
  -1,148
  -1,223
  -1,299
  -1,379
  -1,461
  -1,547
  -1,636
  -1,728
  -1,825
  -1,925
  -2,031
  -2,140
  -2,255
  -2,375
  -2,501
  -2,632
  -2,770
  -2,914
  -3,065
Cash from operations, $m
  50,557
  51,640
  52,859
  54,214
  55,704
  57,330
  59,092
  60,993
  63,035
  65,221
  64,104
  66,591
  69,235
  72,042
  75,018
  78,170
  81,503
  85,026
  88,746
  92,672
  96,814
  101,180
  105,780
  110,626
  115,729
  121,100
  126,752
  132,699
  138,955
  145,534
Maintenance CAPEX, $m
  -21,197
  -21,623
  -22,120
  -22,689
  -23,327
  -24,034
  -24,810
  -25,655
  -26,570
  -27,555
  -28,613
  -29,744
  -30,951
  -32,236
  -33,602
  -35,052
  -36,588
  -38,214
  -39,933
  -41,750
  -43,669
  -45,693
  -47,827
  -50,078
  -52,448
  -54,945
  -57,574
  -60,341
  -63,253
  -66,316
New CAPEX, $m
  -4,264
  -4,973
  -5,685
  -6,382
  -7,072
  -7,759
  -8,450
  -9,146
  -9,854
  -10,575
  -11,313
  -12,072
  -12,853
  -13,660
  -14,495
  -15,361
  -16,260
  -17,195
  -18,169
  -19,183
  -20,242
  -21,346
  -22,501
  -23,707
  -24,969
  -26,289
  -27,671
  -29,118
  -30,633
  -32,221
Cash from investing activities, $m
  -25,461
  -26,596
  -27,805
  -29,071
  -30,399
  -31,793
  -33,260
  -34,801
  -36,424
  -38,130
  -39,926
  -41,816
  -43,804
  -45,896
  -48,097
  -50,413
  -52,848
  -55,409
  -58,102
  -60,933
  -63,911
  -67,039
  -70,328
  -73,785
  -77,417
  -81,234
  -85,245
  -89,459
  -93,886
  -98,537
Free cash flow, $m
  25,097
  25,044
  25,054
  25,143
  25,305
  25,536
  25,832
  26,191
  26,611
  27,091
  24,178
  24,775
  25,431
  26,146
  26,921
  27,757
  28,655
  29,617
  30,644
  31,739
  32,904
  34,140
  35,452
  36,841
  38,311
  39,865
  41,507
  43,240
  45,069
  46,997
Issuance/(repayment) of debt, $m
  4,234
  5,020
  5,739
  6,443
  7,139
  7,833
  8,530
  9,233
  9,947
  10,675
  11,421
  12,186
  12,975
  13,790
  14,633
  15,507
  16,414
  17,358
  18,341
  19,365
  20,434
  21,549
  22,714
  23,932
  25,206
  26,539
  27,934
  29,394
  30,924
  32,527
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  
  4,234
  5,020
  5,739
  6,443
  7,139
  7,833
  8,530
  9,233
  9,947
  10,675
  11,421
  12,186
  12,975
  13,790
  14,633
  15,507
  16,414
  17,358
  18,341
  19,365
  20,434
  21,549
  22,714
  23,932
  25,206
  26,539
  27,934
  29,394
  30,924
  32,527
Total cash flow (excl. dividends), $m
  29,330
  30,065
  30,793
  31,586
  32,444
  33,369
  34,362
  35,425
  36,559
  37,766
  35,599
  36,962
  38,406
  39,936
  41,554
  43,264
  45,069
  46,975
  48,985
  51,104
  53,337
  55,689
  58,166
  60,773
  63,517
  66,404
  69,441
  72,635
  75,993
  79,524
Retained Cash Flow (-), $m
  -980
  -1,014
  -1,159
  -1,301
  -1,442
  -1,582
  -1,722
  -1,864
  -2,009
  -2,156
  -2,306
  -2,461
  -2,620
  -2,784
  -2,955
  -3,131
  -3,314
  -3,505
  -3,703
  -3,910
  -4,126
  -4,351
  -4,587
  -4,832
  -5,090
  -5,359
  -5,640
  -5,935
  -6,244
  -6,568
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
  28,350
  29,051
  29,634
  30,285
  31,003
  31,788
  32,640
  33,560
  34,550
  35,611
  33,293
  34,501
  35,786
  37,151
  38,599
  40,132
  41,755
  43,470
  45,282
  47,194
  49,211
  51,338
  53,580
  55,941
  58,428
  61,045
  63,800
  66,699
  69,749
  72,956
Discount rate, %
  9.30
  9.77
  10.25
  10.77
  11.30
  11.87
  12.46
  13.09
  13.74
  14.43
  15.15
  15.91
  16.70
  17.54
  18.41
  19.33
  20.30
  21.32
  22.38
  23.50
  24.68
  25.91
  27.20
  28.57
  29.99
  31.49
  33.07
  34.72
  36.46
  38.28
PV of cash for distribution, $m
  25,938
  24,112
  22,112
  20,119
  18,149
  16,218
  14,344
  12,547
  10,845
  9,253
  7,055
  5,869
  4,805
  3,869
  3,059
  2,373
  1,804
  1,342
  976
  693
  479
  323
  212
  135
  83
  49
  29
  16
  8
  4
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

Verizon Communications Inc. is a holding company. The Company, through its subsidiaries, provides communications, information and entertainment products and services to consumers, businesses and governmental agencies. Its segments include Wireless and Wireline. The Wireless segment offers communications products and services, including wireless voice and data services and equipment sales, to consumer, business and government customers across the United States. The Wireline segment offers voice, data and video communications products and services, such as broadband video, data center and cloud services, security and managed network services, and local and long distance voice services. The Company has combined Yahoo! Inc.’s operating assets with its existing AOL Inc. business to create a new subsidiary, Oath Inc., owns a diverse house of more than 50 media and technology brands. The Oath portfolio includes HuffPost, Yahoo Sports, AOL.com, MAKERS, Tumblr, Yahoo Finance and Yahoo Mail.

FINANCIAL RATIOS  of  Verizon Communications (VZ)

Valuation Ratios
P/E Ratio 16.9
Price to Sales 1.8
Price to Book 9.8
Price to Tangible Book
Price to Cash Flow 9.7
Price to Free Cash Flow 43.2
Growth Rates
Sales Growth Rate -4.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -36.5%
Cap. Spend. - 3 Yr. Gr. Rate 0.5%
Financial Strength
Quick Ratio 1
Current Ratio 0
LT Debt to Equity 468.1%
Total Debt to Equity 479.8%
Interest Coverage 6
Management Effectiveness
Return On Assets 6.5%
Ret/ On Assets - 3 Yr. Avg. 6.8%
Return On Total Capital 10.2%
Ret/ On T. Cap. - 3 Yr. Avg. 10.6%
Return On Equity 67.4%
Return On Equity - 3 Yr. Avg. 76.5%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 59.2%
Gross Margin - 3 Yr. Avg. 60%
EBITDA Margin 32.5%
EBITDA Margin - 3 Yr. Avg. 32.7%
Operating Margin 21.5%
Oper. Margin - 3 Yr. Avg. 20.7%
Pre-Tax Margin 16.7%
Pre-Tax Margin - 3 Yr. Avg. 16.7%
Net Profit Margin 10.4%
Net Profit Margin - 3 Yr. Avg. 10.5%
Effective Tax Rate 35.2%
Eff/ Tax Rate - 3 Yr. Avg. 30.6%
Payout Ratio 70.6%

VZ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the VZ stock intrinsic value calculation we used $126034 million for the last fiscal year's total revenue generated by Verizon Communications. The default revenue input number comes from 2017 income statement of Verizon Communications. 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 VZ 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 9.3%, whose default value for VZ is calculated based on our internal credit rating of Verizon Communications, 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 Verizon Communications.
    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 VZ stock the variable cost ratio is equal to 78.5%.

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 VZ 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 Verizon Communications.

Corporate tax rate of 27% is the nominal tax rate for Verizon Communications. 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 VZ 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 VZ are equal to 168.2%.

Life of production assets of 10 years is the average useful life of capital assets used in Verizon Communications 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 VZ is equal to -16%. 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 - $43096 million for Verizon Communications - 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 4084 million for Verizon Communications 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 Verizon Communications at the current share price and the inputted number of shares is $221.6 billion.

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