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Fcfe 2 ST
Fcfe 2 ST
This model is designed to value the equity in a firm, with two stages of growth, an initial
period of higher growth and a subsequent period of stable growth.
Assumptions
1. The firm is expected to grow at a higher growth rate in the first period.
2. The growth rate will drop at the end of the first period to the stable growth rate.
3. The free cashflow to equity is the correct measure of expected cashflows to stockholders.
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Two-Stage FCFE Discount Model
Earnings Inputs
Do you want to use the historical growth rate? Yes (Yes or No)
If yes, enter EPS from five years ago = $0.49 (in currency)
Do you want to calculate the growth rate from fundamentals? Yes (Yes or No)
If yes, enter the following inputs:
Net Income Currently = $1,077.00 (in currency)
Interest Expense Currently = $53.85 Last year (in currency)
Book Value of Debt = $600.00 $550.00 (in currency)
Book Value of Equity = $5,445.00 $5,130.00 (in currency)
Tax Rate on Income= 36.00% (in percent)
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Two-Stage FCFE Discount Model
Beta
Will the beta to change in the stable period? Yes (Yes or No)
If yes, enter the beta for stable period = 1.1
Do you want to keep the current fraction of working capital to Yes (Yes or No)
Specify working capital as a percent of revenue 40% (in percent)
Do you want to use the current debt ratio as your desired mix? Yes (Yes or No)
If no, enter the following inputs for financing mix,
Desired debt financing proportion - Capital Spending (in percent)
Aswath Damodaran:
If you are going to assume perpetual growth, you
should answer no here and make sure that cap ex is
higher than depreciation in yourterminal year.
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Two-Stage FCFE Discount Model
Aswath Damodaran:
Desired debt financing proportion - Working Capital (in percent) If you are going to assume perpetual growth, you
should answer no here and make sure that cap ex is
higher than depreciation in yourterminal year.
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Two-Stage FCFE Discount Model
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Two-Stage FCFE Discount Model
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Two-Stage FCFE Discount Model
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Two-Stage FCFE Discount Model
of growth, an initial
growth.
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Two-Stage FCFE Discount Model
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Two-Stage FCFE Discount Model
daran:
g to assume perpetual growth, you
no here and make sure that cap ex is
reciation in yourterminal year.
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Two-Stage FCFE Discount Model
daran:
g to assume perpetual growth, you
no here and make sure that cap ex is
reciation in yourterminal year.
swath Damodaran:
es or No. If yes, enter the return on
quity that your firm will have in
erpetuity below. If no, enter cap ex as
percent of depreciatiion.
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Two-Stage FCFE Discount Model
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Two-Stage FCFE Discount Model
Terminal Year
$11.79
$4.91
$0.99
$5.90
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