Select Analysis, then Tools/Calculators, and then ScratchPad Valuation.
In Number of Forecast Periods, enter the number of years representing the discrete cash flow forecast or “value growth duration”.
In Sales (Last Historical Period), enter gross revenues less sales adjustments (discounts taken, returns) for the last historical period.
In Sale Growth Rate (%), enter your estimate of the anticipated rate of sales growth.
In Operating Profit margin (%), enter the Operating Profit Margin.
Enter the Operating Profit Margin, which is a pre-tax, pre-interest measure:
Operating Profit less Amortization of Goodwill and Intangibles
In Incremental Fixed Capital Invest. (%), enter your estimate.
In Incremental Working Capital Invest. (%) enter your estimate.
In Tax Rate on Operating Profit (%), enter the estimated amount of cash taxes paid on Operating Profit.
The Tax Rate on Operating Profit is calculated as:
Tax Rate on Operating Profit = Tax on Operating Profit / Taxable Operating Profit * 100
In Residual Value Income Tax Rate (%), enter a value.
This is the income tax rate applied during the years after the forecast period. In many cases, is reasonable to use a rate equal to the Marginal Tax Rate.
In Cost of Capital (K) (%), enter the Cost of Capital or discount rate, which is the weighted average costs of debt and equity.
You can calculate this figure using the Cost of Capital Calculator—see Using the Cost of Capital Calculator.
In Marketable Securities and Investments, enter current market values of non-operating investments.
Include stocks, bonds, and overfunded pension plans.
In Mkt. Value of Debt and Other, enter a value.
Add to this the values of long-term obligations like preferred stock, minority interest, and contingent liabilities.
In Number of Common Shares, enter the number of shares outstanding for the company.
For private companies or divisions, enter zero.
Calculate Results displays calculate values of:
Cum. PV of Cash Flows
The Cum. PV (Present Value) of Cash Flows represents the cumulative value of all future periods' cash flow expressed in today’s dollars. It is calculated by multiplying the Discount Factor by the dollar value of the future cash flow.
+ (plus) PV of Residual Value
The Present Value of Residual Value is the portion of total corporate value attributable to the company’s operations beyond the final year of the forecast period, expressed in today’s currency.
+ (plus) Market Securities
The value entered under Input Parameters.
= (equals) Corporate Value
The total economic value of the company equals:
The present value of all forecasted cash flow from operations during the forecast period.
The present value of the “Residual Value”—the value of the company’s operations beyond the forecast period.
“Investments”—Marketable Securities and long-term Investments in Bonds and Stocks.
- (minus) Market Value of Debt
The value entered in the Input Parameters section.
= (equals) Shareholder Value
The Shareholder Value of the company is the Corporate Value less the Market Value of Debt.
Shareholder Value /Share
Shareholder Value divided by the Number of Common Shares.