Forcasting and estimating share value using the DCF Model
Following are the income statement and balance sheet for intel corparation.
INTEL CORPORATION
Consolidated Statements of Income
|
Years Ended December
(In Millions, Except Per Share Amounts)
|
2012
|
2011
|
2010
|
|
|
|
|
|
|
Net revenue
|
S 53,341
|
S 53,999
|
S 46,623
|
|
Cost of sales
|
20,190
|
20,242
|
15,132
|
|
Gross margin
|
33,151
|
33,757
|
28,491
|
|
Research and development
|
10,148
|
8,350
|
6,576
|
|
Marketing, general and adminstrative
|
8,057
|
7,670
|
6,309
|
|
Amortization of acquisition-related Intangibles
|
308
|
260
|
18
|
|
Operating expenses
|
18,513
|
16,280
|
12,903
|
|
Operating income
|
14,638
|
17,477
|
15,588
|
|
Gains (losses) on other equity investments, net
|
141
|
112
|
348
|
|
Interest and other, net
|
94
|
192
|
109
|
|
Income before taxes
|
14,873
|
17,781
|
16,045
|
|
Provisions for taxes
|
3,868
|
4,839
|
4,581
|
|
Net income
|
S 11,005
|
S 12,942
|
S 11,464
|
INTEL CORPORATION
Consolidated Balance Sheets
|
As of Year-Ended (In millions, except par value)
|
Dec.29.
2012
|
Dec. 31,
2011
|
|
Assets
Current assets
|
|
|
|
Cash and cash equivalents
|
S 8,478
|
S 5,065
|
|
Short-term investments
|
3,999
|
5,181
|
|
Trading assets
|
5,685
|
4,591
|
|
Accounts receivables, net
|
3,833
|
3,650
|
|
Inventories
|
4,734
|
4,096
|
|
Deferred tax assets
|
2,117
|
1,700
|
|
Other current assets
|
2.512
|
1,589
|
|
Total current assets
|
31,358
|
25,872
|
|
Property, plant and equipment, net
|
27,983
|
23,627
|
|
Marketable equity securities
|
4,424
|
562
|
|
Other long-term investments"
|
493
|
889
|
|
Goodwill
|
9,710
|
9,254
|
|
Identified intangible assets
|
6,235
|
6,21
|
|
Other long-term assets
|
4,148
|
4,648
|
|
Total assets
|
$84,351
|
$71,119
|
|
Liabilities
Currnet liabilities
|
|
|
|
|
Short-term debt
|
$312
|
$247
|
|
|
Accounts payable
|
3,023
|
2,956
|
|
|
Accrued compensation and benefits
|
2,972
|
2,948
|
|
|
Accrued advertising
|
1,015
|
1,134
|
|
|
Deferred income
|
1,932
|
1,929
|
|
|
Other accrued liabilities
|
3,644
|
2,814
|
|
|
Total current liabilities
|
12,898
|
12,028
|
|
|
Long-term debt
|
13,136
|
7,084
|
|
|
Long-term deferred tax liabilities
|
3,412
|
2,617
|
|
|
Other long-term liabilities
|
3,702
|
3,479
|
|
|
Stockholders' equity
|
|
|
|
|
Preferred stock. $0.001 par value, 50 shares authorized; none issued
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value, 10,000 shares authorized; 4,944 issued and outstanding (5,000 issued and outstanding in 2011) and capital in excess of par value
|
|
|
19,464
|
17,036
|
|
|
Accumulated other comprehensive income (loss)
|
(399)
|
(781)
|
|
|
Retained earnings
|
32,138
|
29,65'
|
|
|
Total stockholders' equity
|
51,203
|
45,91
|
|
|
|
$
|
|
|
|
Total liabilities and stockholders' equity
|
|
S 71,119
|
|
|
|
84,351
|
|
|
(a) Compute Intel's net operating assets (NOA) for year-end 2012.
(b) Compute net operating profit after tax (NOPAT) for 2012, assuming a federal and state statutory tax rate of 37%.
(Round your answer to the nearest whole number.)
(c) Forecast Intel's sales, NOPAT, and NOA for years 2013 through 2016 using the following assumptions:
(d) Estimate the value of a share of Intel common stock using the discounted cash flow (DCF) model as of December 29, 2012; assume a discount rate (WACC) of 11%, common shares outstanding of 4,944 million, and net nonoperating obligations (NNO) of $(9,138) million (NNO is negative which means that Intel has net nonoperating investments). Use your rounded answers for subsequent calculations.
(e) Intel (INTC) stock closed at $21.09 on February 19, 2013, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price?
What do you believe are some reasons for the difference? What investment decision is suggested from your results?