# Mondelēz International Inc. (NASDAQ:MDLZ)

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

Intermediate level

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)

Mondelēz International Inc., 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 6.74%
01 FCFF0 3,364
1 FCFF1 3,498 = 3,364 × (1 + 3.96%) 3,277
2 FCFF2 3,632 = 3,498 × (1 + 3.85%) 3,188
3 FCFF3 3,768 = 3,632 × (1 + 3.74%) 3,098
4 FCFF4 3,905 = 3,768 × (1 + 3.64%) 3,008
5 FCFF5 4,043 = 3,905 × (1 + 3.53%) 2,917
5 Terminal value (TV5) 130,329 = 4,043 × (1 + 3.53%) ÷ (6.74%3.53%) 94,039
Intrinsic value of Mondelēz International Inc.’s capital 109,526
Less: Debt (fair value) 21,568
Intrinsic value of Mondelēz International Inc.’s common stock 87,958

Intrinsic value of Mondelēz International Inc.’s common stock (per share) \$62.62
Current share price \$61.85

Based on: 10-K (filing date: 2021-02-05).

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)

Mondelēz International Inc., cost of capital

Value1 Weight Required rate of return2 Calculation
Equity (fair value) 86,881 0.80 8.01%
Debt (fair value) 21,568 0.20 1.66% = 2.17% × (1 – 23.52%)

Based on: 10-K (filing date: 2021-02-05).

1 US\$ in millions

Equity (fair value) = No. shares of common stock outstanding × Current share price
= 1,404,711,224 × \$61.85
= \$86,881,389,204.40

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
= (36.20% + 22.30% + 26.40% + 23.80% + 8.90%) ÷ 5
= 23.52%

WACC = 6.74%

### FCFF Growth Rate (g)

#### FCFF growth rate (g) implied by PRAT model

Mondelēz International Inc., PRAT model

Average Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Selected Financial Data (US\$ in millions)
Interest expense, debt 423  484  462  396  515
Net earnings attributable to Mondelēz International 3,555  3,870  3,381  2,922  1,659

Effective income tax rate (EITR)1 36.20% 22.30% 26.40% 23.80% 8.90%

Interest expense, debt, after tax2 270  376  340  302  469
Add: Cash dividends declared 1,718  1,576  1,409  1,239  1,116
Interest expense (after tax) and dividends 1,988  1,952  1,749  1,541  1,585

EBIT(1 – EITR)3 3,825  4,246  3,721  3,224  2,128

Short-term borrowings 29  2,638  3,192  3,517  2,531
Current portion of long-term debt 2,741  1,581  2,648  1,163  1,451
Long-term debt, excluding current portion 17,276  14,207  12,532  12,972  13,217
Total Mondelēz International shareholders’ equity 27,578  27,275  25,637  26,111  25,161
Total capital 47,624  45,701  44,009  43,763  42,360
Financial Ratios
Retention rate (RR)4 0.48 0.54 0.53 0.52 0.26
Return on invested capital (ROIC)5 8.03% 9.29% 8.46% 7.37% 5.02%
Averages
RR 0.52
ROIC 7.63%

FCFF growth rate (g)6 3.96%

Based on: 10-K (filing date: 2021-02-05), 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-24).

2020 Calculations

2 Interest expense, debt, after tax = Interest expense, debt × (1 – EITR)
= 423 × (1 – 36.20%)
= 270

3 EBIT(1 – EITR) = Net earnings attributable to Mondelēz International + Interest expense, debt, after tax
= 3,555 + 270
= 3,825

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [3,8251,988] ÷ 3,825
= 0.48

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 3,825 ÷ 47,624
= 8.03%

6 g = RR × ROIC
= 0.52 × 7.63%
= 3.96%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (108,449 × 6.74%3,364) ÷ (108,449 + 3,364)
= 3.53%

where:

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

#### FCFF growth rate (g) forecast

Mondelēz International Inc., H-model

Year Value gt
1 g1 3.96%
2 g2 3.85%
3 g3 3.74%
4 g4 3.64%
5 and thereafter g5 3.53%

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 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 3.96% + (3.53%3.96%) × (2 – 1) ÷ (5 – 1)
= 3.85%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 3.96% + (3.53%3.96%) × (3 – 1) ÷ (5 – 1)
= 3.74%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 3.96% + (3.53%3.96%) × (4 – 1) ÷ (5 – 1)
= 3.64%