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.

Intrinsic Stock Value (Valuation Summary)
Weighted Average Cost of Capital (WACC)
FCFF Growth Rate (g)

Salesforce Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Year	Value	FCFF_t or Terminal value (TV_t)	Calculation	Present value at 17.18%
0¹	FCFF₀	12,628
1	FCFF₁	13,125	= 12,628 × (1 + 3.93%)	11,200
2	FCFF₂	13,906	= 13,125 × (1 + 5.96%)	10,127
3	FCFF₃	15,016	= 13,906 × (1 + 7.98%)	9,332
4	FCFF₄	16,517	= 15,016 × (1 + 10.00%)	8,760
5	FCFF₅	18,503	= 16,517 × (1 + 12.02%)	8,375
5	Terminal value (TV₅)	401,849	= 18,503 × (1 + 12.02%) ÷ (17.18% – 12.02%)	181,875
Intrinsic value of Salesforce Inc. capital				229,670
Less: Debt and finance lease liabilities (fair value)				7,278
Intrinsic value of Salesforce Inc. common stock				222,392

Intrinsic value of Salesforce Inc. common stock (per share)				$231.42
Current share price				$277.81

Based on: 10-K (reporting date: 2025-01-31).

¹ See details »

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.

Salesforce Inc., cost of capital

	Value¹	Weight	Required rate of return²	Calculation
Equity (fair value)	266,975	0.97	17.60%
Debt and finance lease liabilities (fair value)	7,278	0.03	1.80%	= 2.78% × (1 – 35.08%)

Based on: 10-K (reporting date: 2025-01-31).

¹ US$ in millions

Equity (fair value) = No. shares of common stock outstanding × Current share price
= 961,000,000 × $277.81
= $266,975,410,000.00

Debt and finance lease liabilities (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
= (16.68% + 16.44% + 68.48% + 5.74% + 21.00% + 82.15%) ÷ 6
= 35.08%

WACC = 17.18%

FCFF growth rate (g) implied by PRAT model

Salesforce Inc., PRAT model

	Average	Jan 31, 2025	Jan 31, 2024	Jan 31, 2023	Jan 31, 2022	Jan 31, 2021	Jan 31, 2020
Selected Financial Data (US$ in millions)
Interest expense		272)	283)	300)	221)	125)	130)
Net income		6,197)	4,136)	208)	1,444)	4,072)	126)

Effective income tax rate (EITR)¹		16.68%	16.44%	68.48%	5.74%	21.00%	82.15%

Interest expense, after tax²		227)	236)	95)	208)	99)	23)
Add: Cash dividends declared		1,549)	—)	—)	—)	—)	—)
Interest expense (after tax) and dividends		1,776)	236)	95)	208)	99)	23)

EBIT(1 – EITR)³		6,424)	4,372)	303)	1,652)	4,171)	149)

Finance lease liabilities, current		337)	372)	257)	114)	35)	53)
Debt, current		—)	999)	1,182)	4)	4)	4)
Noncurrent debt, excluding current portion		8,433)	8,427)	9,419)	10,592)	2,673)	2,673)
Noncurrent finance lease liabilities		341)	602)	534)	271)	93)	332)
Stockholders’ equity		61,173)	59,646)	58,359)	58,131)	41,493)	33,885)
Total capital		70,284)	70,046)	69,751)	69,112)	44,298)	36,947)
Financial Ratios
Retention rate (RR)⁴		0.72	0.95	0.69	0.87	0.98	0.84
Return on invested capital (ROIC)⁵		9.14%	6.24%	0.43%	2.39%	9.42%	0.40%
Averages
RR	0.84
ROIC	4.67%

FCFF growth rate (g)⁶	3.93%

Based on: 10-K (reporting date: 2025-01-31), 10-K (reporting date: 2024-01-31), 10-K (reporting date: 2023-01-31), 10-K (reporting date: 2022-01-31), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-01-31).

¹ See details »

2025 Calculations

² Interest expense, after tax = Interest expense × (1 – EITR)
= 272 × (1 – 16.68%)
= 227

³ EBIT(1 – EITR) = Net income + Interest expense, after tax
= 6,197 + 227
= 6,424

⁴ RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [6,424 – 1,776] ÷ 6,424
= 0.72

⁵ ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 6,424 ÷ 70,284
= 9.14%

⁶ g = RR × ROIC
= 0.84 × 4.67%
= 3.93%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value₀ × WACC – FCFF₀) ÷ (Total capital, fair value₀ + FCFF₀)
= 100 × (274,253 × 17.18% – 12,628) ÷ (274,253 + 12,628)
= 12.02%

where:

Total capital, fair value₀ = current fair value of Salesforce Inc. debt and equity (US$ in millions)
FCFF₀ = the last year Salesforce Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Salesforce Inc. capital

FCFF growth rate (g) forecast

Salesforce Inc., H-model

Year	Value	g_t
1	g₁	3.93%
2	g₂	5.96%
3	g₃	7.98%
4	g₄	10.00%
5 and thereafter	g₅	12.02%

where:
g₁ is implied by PRAT model
g₅ is implied by single-stage model
g₂, g₃ and g₄ are calculated using linear interpolation between g₁ and g₅

Calculations

g₂ = g₁ + (g₅ – g₁) × (2 – 1) ÷ (5 – 1)
= 3.93% + (12.02% – 3.93%) × (2 – 1) ÷ (5 – 1)
= 5.96%

g₃ = g₁ + (g₅ – g₁) × (3 – 1) ÷ (5 – 1)
= 3.93% + (12.02% – 3.93%) × (3 – 1) ÷ (5 – 1)
= 7.98%

g₄ = g₁ + (g₅ – g₁) × (4 – 1) ÷ (5 – 1)
= 3.93% + (12.02% – 3.93%) × (4 – 1) ÷ (5 – 1)
= 10.00%

Salesforce Inc. (NYSE:CRM)

Present Value of Free Cash Flow to the Firm (FCFF)

Intrinsic Stock Value (Valuation Summary)

Weighted Average Cost of Capital (WACC)

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

FCFF growth rate (g) implied by single-stage model

FCFF growth rate (g) forecast