McKesson Corp., FCFF calculation

US$ in millions

12 months ended:	Mar 31, 2016	Mar 31, 2015	Mar 31, 2014	Mar 31, 2013	Mar 31, 2012	Mar 31, 2011
Net income attributable to McKesson Corporation	2,258)	1,476)	1,263)	1,338)	1,403)	1,202)
Net (income) loss attributable to noncontrolling interests	52)	67)	(5)	—)	—)	—)
Net noncash charges	1,466)	2,179)	1,370)	1,108)	1,087)	834)
Changes in operating assets and liabilities, net of acquisitions	(104)	(610)	508)	37)	460)	302)
Net cash provided by operating activities	3,672)	3,112)	3,136)	2,483)	2,950)	2,338)
Cash paid for interest, net of tax¹	243)	249)	165)	144)	167)	169)
Payments for property, plant and equipment	(488)	(376)	(278)	(246)	(225)	(233)
Capitalized software expenditures	(189)	(169)	(141)	(160)	(178)	(155)
Free cash flow to the firm (FCFF)	3,238)	2,816)	2,882)	2,221)	2,714)	2,119)

Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).

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Item	Description	The company
FCFF	Free cash flow to the firm is the cash flow available to the McKesson Corp. suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.	McKesson Corp. FCFF decreased from 2014 to 2015 but then increased from 2015 to 2016 exceeding 2014 level.

McKesson Corp., interest paid, net of tax calculation

US$ in millions

12 months ended:	Mar 31, 2016	Mar 31, 2015	Mar 31, 2014	Mar 31, 2013	Mar 31, 2012	Mar 31, 2011
Earnings before tax (EBT)
Net income attributable to McKesson Corporation	2,258)	1,476)	1,263)	1,338)	1,403)	1,202)
Add: Net income attributable to noncontrolling interest	52)	67)	(5)	—)	—)	—)
Less: Income (loss) from discontinued operations, net of tax	(32)	(299)	(96)	—)	—)	72)
Add: Income tax expense	908)	815)	742)	581)	516)	505)
EBT	3,250)	2,657)	2,096)	1,919)	1,919)	1,635)
Effective Income Tax Rate (EITR)
EITR¹	27.94%	30.67%	35.40%	30.28%	26.89%	30.89%
Interest Paid, Net of Tax
Cash paid for interest, before tax	337)	359)	255)	207)	228)	244)
Less: Cash paid for interest, tax²	94)	110)	90)	63)	61)	75)
Cash paid for interest, net of tax	243)	249)	165)	144)	167)	169)

Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).

¹ 2016 Calculation
EITR = 100 × Income tax expense ÷ EBT
= 100 × 908 ÷ 3,250 = 27.94%

² 2016 Calculation
Cash paid for interest, tax = Cash paid for interest × EITR
= 337 × 27.94% = 94

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McKesson Corp., current EV/FCFF calculation, comparison to benchmarks

Selected Financial Data (US$ in millions)
Enterprise value (EV)	40,477)
Free cash flow to the firm (FCFF)	3,238)
Valuation Ratio
EV/FCFF	12.50
Benchmarks
EV/FCFF, Competitors¹
Abbott Laboratories	34.13
Cigna Group	10.98
CVS Health Corp.	9.91
Elevance Health Inc.	14.65
Humana Inc.	8.22
Intuitive Surgical Inc.	169.04
Medtronic PLC	24.76
Shockwave Medical Inc.	72.77
UnitedHealth Group Inc.	17.13

Based on: 10-K (reporting date: 2016-03-31).

¹ Click competitor name to see calculations.

If the company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.
Otherwise, if the company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

McKesson Corp., historical EV/FCFF calculation, comparison to benchmarks

	Mar 31, 2016	Mar 31, 2015	Mar 31, 2014	Mar 31, 2013	Mar 31, 2012	Mar 31, 2011
Selected Financial Data (US$ in millions)
Enterprise value (EV)¹	43,051)	57,740)	49,411)	27,034)	22,057)	21,278)
Free cash flow to the firm (FCFF)²	3,238)	2,816)	2,882)	2,221)	2,714)	2,119)
Valuation Ratio
EV/FCFF³	13.30	20.51	17.15	12.17	8.13	10.04
Benchmarks
EV/FCFF, Competitors⁴
Abbott Laboratories	—	—	—	—	—	—
Cigna Group	—	—	—	—	—	—
CVS Health Corp.	—	—	—	—	—	—
Elevance Health Inc.	—	—	—	—	—	—
Humana Inc.	—	—	—	—	—	—
Intuitive Surgical Inc.	—	—	—	—	—	—
Medtronic PLC	—	—	—	—	—	—
Shockwave Medical Inc.	—	—	—	—	—	—
UnitedHealth Group Inc.	—	—	—	—	—	—

Based on: 10-K (reporting date: 2016-03-31), 10-K (reporting date: 2015-03-31), 10-K (reporting date: 2014-03-31), 10-K (reporting date: 2013-03-31), 10-K (reporting date: 2012-03-31), 10-K (reporting date: 2011-03-31).

¹ See details »

² See details »

³ 2016 Calculation
EV/FCFF = EV ÷ FCFF
= 43,051 ÷ 3,238 = 13.30

⁴ Click competitor name to see calculations.

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Valuation ratio	Description	The company
EV/FCFF	Enterprise value to free cash flow to the firm is whole company valuation indicator.	McKesson Corp. EV/FCFF ratio increased from 2014 to 2015 but then decreased significantly from 2015 to 2016.

McKesson Corp. (NYSE:MCK)

Enterprise Value to FCFF (EV/FCFF)

Free Cash Flow to The Firm (FCFF)

Interest Paid, Net of Tax

Enterprise Value to FCFF Ratio, Current

Enterprise Value to FCFF Ratio, Historical