Section__9B____SP__09_Valuation

# Section_9B_SP_0 - Section#9B Valuation March 25th 2009 Copyright 2009 by Rich Curtis The Amgen Financial Statements Key Statistics and Analyst

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Section #9B Valuation March 25th, 2009 Copyright 2009 by Rich Curtis

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The Amgen Financial Statements, Key Statistics, and Analyst Estimates on the following 5 slides were obtained from: http://finance.yahoo.com On line 2 of p. 17, please change “21-25” to “22-26”.

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10. Firm Valuation Based on Discounted Cash Flows (See “Section #9” Notes, pp. 15-26) Cash Flow = NOPAT + Depreciation & Amortization - Increases in Working Capital - Capital Expenditures NOPAT = (1-t c )(Operating Revenues - Operating Expenses) a. Enterprise Value = (Debt - Cash) + Preferred + Common b. Net Operating Profit After Tax = Profit if the firm had no debt Net Debt
Time 0 1 2 3 CF 1 CF 2 CF 3 EV 0 Enterprise Value 0 = CF 1 1+WACC at + CF 2 1+WACC at 2 + CF 3 1+WACC at 3 + . .. 2.

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3. If the CF’s grow at the constant rate g forever after Time t+1, and if g < WACC at , then: Perpetuity Value t = Enterprise Value t = CF t+1 WACC at - g and Enterprise Value = CF 1 1+WACC at + CF 2 1+WACC at 2 + . .. + CF t-1 1+WACC at t-1 + CF t + Perpetuity Value t 1+WACC at t
Time 0 1 2 CF 1 CF 2 CF 10 EV 0 Enterprise Value 0 = CF 1 1+WACC at + CF 2 1+WACC at 2 + . .. + CF 9 1+WACC at 9 + CF 10 1+WACC at 10 + CF 11 WACC at - g 1+WACC at ( ) 10 10 CF 11 11 12 CF 12 Perpetuity Value

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f. Amgen Example (See Section #9 Notes,
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## This note was uploaded on 09/03/2009 for the course AEM 3240 taught by Professor Curtis,r. during the Spring '07 term at Cornell University (Engineering School).

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Section_9B_SP_0 - Section#9B Valuation March 25th 2009 Copyright 2009 by Rich Curtis The Amgen Financial Statements Key Statistics and Analyst

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