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Microsoft Excel LibreOffice Calc

Boeing Co. (NYSE:BA)


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)

Boeing Co., free cash flow to the firm (FCFF) forecast

Stock valuation by this method is not possible because prior year FCFF is less than zero.

US$ in millions, except per share data

Microsoft Excel LibreOffice Calc
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 Boeing Co.’s capital
Less: Debt, including finance lease obligations and commercial paper (fair value)
Intrinsic value of Boeing Co.’s common stock
 
Intrinsic value of Boeing Co.’s common stock (per share)
Current share price

Based on: 10-K (filing date: 2020-01-31).

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)

Boeing Co., cost of capital

Microsoft Excel LibreOffice Calc
Value1 Weight Required rate of return2 Calculation
Equity (fair value)
Debt, including finance lease obligations and commercial paper (fair value) = × (1 – )

Based on: 10-K (filing date: 2020-01-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= × =

   Debt, including finance lease obligations and commercial paper (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

Boeing Co., PRAT model

Microsoft Excel LibreOffice Calc
Average Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in millions)
Interest and debt expense
Net earnings (loss) related to parent
 
Effective income tax rate (EITR)1
 
Interest and debt expense, after tax2
Add: Cash dividends declared
Interest expense (after tax) and dividends
 
EBIT(1 – EITR)3
 
Short-term debt and current portion of long-term debt
Long-term debt, excluding current portion
Shareholders’ equity
Total capital
Financial Ratios
Retention rate (RR)4
Return on invested capital (ROIC)5
Averages
RR
ROIC
 
FCFF growth rate (g)6

Based on: 10-K (filing date: 2020-01-31), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-10).

1 See details »

2019 Calculations

2 Interest and debt expense, after tax = Interest and debt expense × (1 – EITR)
= × (1 – ) =

3 EBIT(1 – EITR) = Net earnings (loss) related to parent + Interest and debt expense, 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

Boeing Co., H-model

Microsoft Excel LibreOffice Calc
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) =