Stock Analysis on Net
Stock Analysis on Net

Ford Motor Co. (NYSE:F)

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

Microsoft Excel

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)

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

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 7.56%
01 FCFF0 12,291
1 FCFF1 5,791 = 12,291 × (1 + -52.89%) 5,384
2 FCFF2 3,514 = 5,791 × (1 + -39.32%) 3,037
3 FCFF3 2,609 = 3,514 × (1 + -25.76%) 2,096
4 FCFF4 2,291 = 2,609 × (1 + -12.19%) 1,711
5 FCFF5 2,322 = 2,291 × (1 + 1.37%) 1,613
5 Terminal value (TV5) 38,042 = 2,322 × (1 + 1.37%) ÷ (7.56% – 1.37%) 26,425
Intrinsic value of Ford Motor Co. capital 40,267
Less: Debt (fair value) 150,308
Intrinsic value of Ford Motor Co. common stock -110,041
 
Intrinsic value of Ford Motor Co. common stock (per share) $-27.56
Current share price $12.79

Based on: 10-K (reporting date: 2023-12-31).

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.

Weighted Average Cost of Capital (WACC)

Ford Motor Co., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 51,062 0.25 18.66%
Debt (fair value) 150,308 0.75 3.79% = 4.89% × (1 – 22.52%)

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 3,992,337,157 × $12.79
= $51,061,992,238.03

   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
= (21.00% + 28.60% + 21.00% + 21.00% + 21.00%) ÷ 5
= 22.52%

WACC = 7.56%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Ford Motor Co., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Interest expense on Company debt excluding Ford Credit 1,302 1,259 1,803 1,649 1,020
Net income (loss) attributable to Ford Motor Company 4,347 (1,981) 17,937 (1,279) 47
 
Effective income tax rate (EITR)1 21.00% 28.60% 21.00% 21.00% 21.00%
 
Interest expense on Company debt excluding Ford Credit, after tax2 1,029 899 1,424 1,303 806
Add: Dividend and dividend equivalents declared 5,072 2,034 411 596 2,408
Interest expense (after tax) and dividends 6,101 2,933 1,835 1,899 3,214
 
EBIT(1 – EITR)3 5,376 (1,082) 19,361 24 853
 
Debt payable within one year 49,669 50,164 49,692 51,343 53,946
Long-term debt payable after one year 99,562 88,805 88,400 110,341 101,361
Equity attributable to Ford Motor Company 42,773 43,242 48,519 30,690 33,185
Total capital 192,004 182,211 186,611 192,374 188,492
Financial Ratios
Retention rate (RR)4 -0.13 — 0.91 -79.08 -2.77
Return on invested capital (ROIC)5 2.80% -0.59% 10.38% 0.01% 0.45%
Averages
RR -20.27
ROIC 2.61%
 
FCFF growth rate (g)6 -52.89%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 See details »

2023 Calculations

2 Interest expense on Company debt excluding Ford Credit, after tax = Interest expense on Company debt excluding Ford Credit × (1 – EITR)
= 1,302 × (1 – 21.00%)
= 1,029

3 EBIT(1 – EITR) = Net income (loss) attributable to Ford Motor Company + Interest expense on Company debt excluding Ford Credit, after tax
= 4,347 + 1,029
= 5,376

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [5,376 – 6,101] ÷ 5,376
= -0.13

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 5,376 ÷ 192,004
= 2.80%

6 g = RR × ROIC
= -20.27 × 2.61%
= -52.89%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (201,370 × 7.56% – 12,291) ÷ (201,370 + 12,291)
= 1.37%

where:

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

FCFF growth rate (g) forecast

Ford Motor Co., H-model

Microsoft Excel
Year Value gt
1 g1 -52.89%
2 g2 -39.32%
3 g3 -25.76%
4 g4 -12.19%
5 and thereafter g5 1.37%

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 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= -52.89% + (1.37% – -52.89%) × (2 – 1) ÷ (5 – 1)
= -39.32%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -52.89% + (1.37% – -52.89%) × (3 – 1) ÷ (5 – 1)
= -25.76%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -52.89% + (1.37% – -52.89%) × (4 – 1) ÷ (5 – 1)
= -12.19%