Present Value of Free Cash Flow to the Firm (FCFF)
In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.
Paying user area
Try for free
Apache Corp. pages available for free this week:
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Apache Corp. for $22.49.
This is a one-time payment. There is no automatic renewal.
We accept:
Intrinsic Stock Value (Valuation Summary)
Apache Corp., free cash flow to the firm (FCFF) forecast
US$ in millions, except per share data
| Year | Value | FCFFt or Terminal value (TVt) | Calculation | Present value at |
|---|---|---|---|---|
| 01 | FCFF0 | |||
| 1 | FCFF1 | = × (1 + ) | ||
| 2 | FCFF2 | = × (1 + ) | ||
| 3 | FCFF3 | = × (1 + ) | ||
| 4 | FCFF4 | = × (1 + ) | ||
| 5 | FCFF5 | = × (1 + ) | ||
| 5 | Terminal value (TV5) | = × (1 + ) ÷ ( – ) | ||
| Intrinsic value of Apache Corp. capital | ||||
| Less: Preferred stock, no par value, 6% Cumulative Mandatory Convertible, Series D, $1,000 per share liquidation preference (book value) | ||||
| Less: Debt (fair value) | ||||
| Intrinsic value of Apache Corp. common stock | ||||
| Intrinsic value of Apache Corp. common stock (per share) | ||||
| Current share price | ||||
Based on: 10-K (reporting date: 2015-12-31).
Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.
Weighted Average Cost of Capital (WACC)
Apache Corp., cost of capital
| Value1 | Weight | Required rate of return2 | Calculation | |
|---|---|---|---|---|
| Equity (fair value) | ||||
| Preferred stock, no par value, 6% Cumulative Mandatory Convertible, Series D, $1,000 per share liquidation preference (book value) | ||||
| Debt (fair value) | = × (1 – ) |
Based on: 10-K (reporting date: 2015-12-31).
1 US$ in millions
Equity (fair value) = No. shares of common stock outstanding × Current share price
= ×
=
Debt (fair value). See details »
2 Required rate of return on equity is estimated by using CAPM. See details »
Required rate of return on debt. See details »
Required rate of return on debt is after tax.
Estimated (average) effective income tax rate
= ( + + + + ) ÷ 5
=
WACC =
FCFF Growth Rate (g)
FCFF growth rate (g) implied by PRAT model
Apache Corp., PRAT model
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
2015 Calculations
1 EITR = 100 × Income tax expense ÷ EBT
= 100 × ÷
=
2 Interest expense, net of capitalized interest, after tax = Interest expense, net of capitalized interest × (1 – EITR)
= × (1 – )
=
3 EBIT(1 – EITR)
= Net income (loss) attributable to Apache shareholders – Net loss from discontinued operations, net of tax + Interest expense, net of capitalized interest, after tax
= – +
=
4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [ – ] ÷
=
5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × ÷
=
6 g = RR × ROIC
= ×
=
FCFF growth rate (g) forecast
Apache Corp., H-model
| Year | Value | gt |
|---|---|---|
| 1 | g1 | |
| 2 | g2 | |
| 3 | g3 | |
| 4 | g4 | |
| 5 and thereafter | g5 |
where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5
Calculations
g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= + ( – ) × (2 – 1) ÷ (5 – 1)
=
g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= + ( – ) × (3 – 1) ÷ (5 – 1)
=
g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= + ( – ) × (4 – 1) ÷ (5 – 1)
=