Paying users zone. Data is covered by .

• Get to Accenture PLC for \$17.99, or

• get to whole website for at least 3 months from \$49.99.

Accenture PLC (ACN)

Present Value of Free Cash Flow to Equity (FCFE)

Difficulty: Intermediate

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 equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company's asset base.

Intrinsic Stock Value (Valuation Summary)

Accenture PLC, free cash flow to equity (FCFE) forecast

USD \$ in thousands, except per share data

Year Value FCFEt or Terminal value (TVt) Calculation Present value at %
01 FCFE0
1 FCFE1 = × (1 + %)
2 FCFE2 = × (1 + %)
3 FCFE3 = × (1 + %)
4 FCFE4 = × (1 + %)
5 FCFE5 = × (1 + %)
5 Terminal value (TV5) = × (1 + %) ÷ (% – %)
Intrinsic value of Accenture's common stock
Intrinsic value of Accenture's common stock (per share) \$
Current share price \$

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.

Required Rate of Return (r)

 Assumptions Rate of return on LT Treasury Composite1 RF % Expected rate of return on market portfolio2 E(RM) % Systematic risk (β) of Accenture's common stock βACN Required rate of return on Accenture's common stock3 rACN %

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

Calculations

3 rACN = RF + βACN [E(RM) – RF]
= % + [% – %]
= %

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Accenture PLC, PRAT model

Average Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014 Aug 31, 2013 Aug 31, 2012
Selected Financial Data (USD \$ in thousands)
Dividends
Net income attributable to Accenture plc
Revenues before reimbursements (Net revenues)
Total assets
Total Accenture plc shareholders' equity
Ratios
Retention rate1
Profit margin2 % % % % % %
Asset turnover3
Financial leverage4
Averages
Retention rate
Profit margin %
Asset turnover
Financial leverage
Growth rate of FCFE (g)5 %

2017 Calculations

1 Retention rate = (Net income attributable to Accenture plc – Dividends) ÷ Net income attributable to Accenture plc
= () ÷ =

2 Profit margin = 100 × Net income attributable to Accenture plc ÷ Revenues before reimbursements (Net revenues)
= 100 × ÷ = %

3 Asset turnover = Revenues before reimbursements (Net revenues) ÷ Total assets
= ÷ =

4 Financial leverage = Total assets ÷ Total Accenture plc shareholders' equity
= ÷ =

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= × % × × = %

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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × ( × % – ) ÷ ( + ) = %

where:
Equity market value0 = current market value of Accenture's common stock (USD \$ in thousands)
FCFE0 = last year Accenture's free cash flow to equity (USD \$ in thousands)
r = required rate of return on Accenture's common stock

FCFE growth rate (g) forecast

Accenture PLC, 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 + (g5g1) × (2 – 1) ÷ (5 – 1)
= % + (% – %) × (2 – 1) ÷ (5 – 1) = %

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

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