Salesforce Inc. (NYSE:CRM)

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

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.

Paying users area

The data is hidden behind: . Unhide it.

• get full access to the entire website for at least 3 months from \$49.99.

This is a one-time payment. There is no automatic renewal.

We accept:

Intrinsic Stock Value (Valuation Summary)

Salesforce 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
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 Salesforce Inc. capital
Less: Debt and finance lease liabilities (fair value)
Intrinsic value of Salesforce Inc. common stock

Intrinsic value of Salesforce Inc. common stock (per share)
Current share price

Based on: 10-K (reporting date: 2023-01-31).

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)

Salesforce Inc., cost of capital

Value1 Weight Required rate of return2 Calculation
Equity (fair value)
Debt and finance lease liabilities (fair value) = × (1 – )

Based on: 10-K (reporting date: 2023-01-31).

1 US\$ in millions

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

Debt and finance lease liabilities (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
= ( + + + + + ) ÷ 6
=

WACC =

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Salesforce Inc., PRAT model

Average Jan 31, 2023 Jan 31, 2022 Jan 31, 2021 Jan 31, 2020 Jan 31, 2019 Jan 31, 2018
Selected Financial Data (US\$ in millions)
Interest expense on debt
Net income

Effective income tax rate (EITR)1

Interest expense on debt, after tax2
Interest expense (after tax) and dividends

EBIT(1 – EITR)3

Finance lease liabilities, current
Debt, current
Noncurrent debt, excluding current portion
Noncurrent finance lease liabilities
Capital lease obligations
Stockholders’ 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 (reporting date: 2023-01-31), 10-K (reporting date: 2022-01-31), 10-K (reporting date: 2021-01-31), 10-K (reporting date: 2020-01-31), 10-K (reporting date: 2019-01-31), 10-K (reporting date: 2018-01-31).

2023 Calculations

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

3 EBIT(1 – EITR) = Net income + Interest expense on debt, 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) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × ( × ) ÷ ( + )
=

where:

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

FCFF growth rate (g) forecast

Salesforce Inc., 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)
=