Illuminia Valuation

Pranay Madan MBS15

WACC calculation

Value Debt Equity total 848020000 17138725000 17986745000

capital structure 5% 95%

Cost of capital 4.73% 6.76%

Cost of Debt : interest expense/ long term debt = 4.73% CAPM = 6.76% Tax rate = 21% Thus WACC= 6.619%

Valuation

Calculated Valuation of company : $9.87 Billion Growth rate assumed after horizon date = 5% Market Cap of illumina : $17.14 Billion Difference : $7.27 Billion

Reasons for difference

The risk free rate was taken to be the 30 year T bond rate which could have increased the WACC and thus decrease the calculated PV Our assumption that depreciation is equal to capital expenditure may have some effect on the valuation The forecasted growth rate assumed may be lower than what the market estimates The growth rate assumed after the horizon date may be lower than what the market anticipates