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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (42992)	6/12/2011 6:44:45 PM
From: Spekulatius	Read Replies (1) \| Respond to of 78763

re INTC - they spent ~5B$ in capex every year, roughly equivalent to depreciation - so they don't really need to add much to their fixed capital base. 5B$ in capex is equivalent to ~25% of last year cash flow, which is not extremely capital heavy. With "residual value", I mean the discounted value of the company at the end of the DCF time series. For example if you look out 10 years you estimate the earnings (10 years out typically ) and put a multiple on this earnings, and discount this value with the discount rate (8%) to NPV. the problem is which earnings, what multiple and to a lesser extend what discount rate (should be based on the risk level) you assume. This is the largest component of the DCF (the NPV dividends from year 1-10 in this example are typically a much smaller part of the total value.