I followed you to the $255 and came up with $255.03, but have a problem with the discounting. If you call this FY year 0 and the first 35% year, year 1, and the first 15% year, year 9, there are 9 years to discount, and I come up with $45.87 per share.
What's more, I don't agree to add 6% and 15%. Think about a world with closer to 100% risk free rates. You can't add them, I think. I prefer to multiply, and the product is 1.219. Using this discount factor for 9 years, yields a PV for DELL of $42.91 + the COH of $1.25 = about today's price.
How did you get $58.35? By discounting for 7 3/4 years (back to November 1, 1999)? |
