Netflix Base year 1 2 3 4 5

Revenue growth rate 15.00% 19.00% 19.00% 19.00% 19.00%

Revenues $ 20,156.447 $ 23,180 $ 27,584 $ 32,825 $ 39,062 $ 46,484
EBIT (Operating) margin 13.34% 13.34% 13.07% 12.94% 12.80% 12.67%
EBIT (Operating income) $ 2,688 $ 3,092 $ 3,606 $ 4,247 $ 5,001 $ 5,889
Tax rate 9.47% 9.47% 15.00% 15.00% 15.00% 15.00%
EBIT(1-t) $ 2,433.68 $ 2,799.37 $ 3,064.92 $ 3,609.87 $ 4,251.26 $ 5,006.05
- Reinvestment (2%) $ 464 $ 552 $ 657 $ 781 $ 930
FCFF $ 2,335.77 $ 2,513.24 $ 2,953.37 $ 3,470.02 $ 4,076.38
NOL $ - $ - $ - $ - $ - $ -

Cost of capital 6.15% 6.15% 6.15% 6.15% 6.15%

Cumulated discount factor 0.9421 0.8875 0.8361 0.7876 0.7420
PV(FCFF) $ 2,200.44 $ 2,230.46 $ 2,469.21 $ 2,733.08 $ 3,024.65

Terminal cash flow $ 5,035.22

Terminal cost of capital 6.11%
Terminal value $ 122,445.38
PV(Terminal value) $ 67,484.84
PV (CF over next 10 years) $ 27,830.18
Sum of PV $ 95,315 enterprise value
Probability of failure = 0.00%
Proceeds if firm fails = $47,657.51
Value of operating assets = $ 95,315.03
- Debt $ 14,759
- Minority interests $ -
+ Cash $ 5,018
+ Non-operating assets $ -
Value of equity ### Market Cap
- Value of options $0.00
Value of equity in common $ 85,574.20
Number of shares 439
Estimated value /share $ 195.02
Price 3,260
Price as % of value 1671.91%

Implied variables
Sales to capital ratio 0.14 0.14 0.14 0.14 0.14
Invested capital $ 165,423 $ 165,887 $ 166,439 $ 167,095 $ 167,876 $ 168,806
ROIC 1.47% 1.69% 1.84% 2.16% 2.53% 2.97%
 6 7 8 9 10 Terminal year Check these revenues against
15.60% 12.20% 8.80% 5.40% 2.00% 2.00% a. Overall market size
$ 53,735 $ 60,291 $ 65,596 $ 69,138 $ 70,521 $ 71,932 b. Largest companies in this market
12.53% 12.40% 12.27% 12.13% 12.00% 12.00%
$ 6,736 $ 7,477 $ 8,047 $ 8,389 $ 8,463 $ 8,632 $ 5,944 This is is how much your operating inco
grew over the ten-year period.
17.00% 19.00% 21.00% 23.00% 25.00% 25.00%
$ 5,590.52 $ 6,056.13 $ 6,357.09 $ 6,459.57 $ 6,346.91 $ 6,473.85
$ 1,075 $ 1,206 $ 1,312 $ 1,383 $ 1,410 $ 1,439 $ 11,206.96 This is how much capital you
invested over the ten year period.
$ 4,515.82 $ 4,850.31 $ 5,045.17 $ 5,076.80 $ 4,936.49 $ 5,035.22
$ - $ - $ - $ - $ - $ -

6.14% 6.13% 6.13% 6.12% 6.11% 6.11%

0.6991 0.6586 0.6206 0.5848 0.5511
$ 3,156.80 $ 3,194.64 $ 3,131.13 $ 2,969.06 $ 2,720.71
 After year 10
0.14 0.14 0.14 0.14 0.14
$ 169,881 $ 171,087 $ 172,398 $ 173,781 $ 175,192
3.29% 3.54% 3.69% 3.72% 3.62% 12.00%

Compare this return on capital in year 10 against

a. the industry average(column E of worksheet)
b. the return on capital after year 10
If it is too high (low), you may want to lower (raise) your sales to capital ratio
 gainst

this market

how much your operating income

er the ten-year period.

ow much capital you

over the ten year period.
es to capital ratio