4. Market Cap $178.35 B
As of December 27, 2014
Price per Share: $37.55
52-Week Range: 25.74 - 37.90
Yield: 2.85%
Average Vol: 32.2 Million
Debt: 13.7 Billion
Equity: 55.9 Billion
Intel Corp manufactures and sells computer
components and related products. They
design communication components, such as
microprocessors found in traditional
personal computers, chipsets, and
motherboards.
5. Intel operates its
business through many
segments:
PC Client Group: Offers products that are incorporated into notebook
and desktop computers, such as microprocessors, chipsets, and
motherboards.
Data Center Group: Offers products that provide performance and
energy efficiency for server, workstation, and storage platforms.
Memory Solutions Group: Delivers flash memory storage devices
and digital memory cards.
6. #243 America’s Best
Employers
#13 World’s Most Valuable
Brands
#78 Global 2000
#161 in Sales
#50 in Profit
#271 in Assets
#47 in Market Value
8. Market Cap $57.3 B
As of December 27, 2014
Price per Share: $54.74
52-Week Range: 41.93 - 55.58
Yield: 2.34%
Average Vol: 5.6 Million
Debt: 4.6 Billion
Equity: 10.4 Billion
Texas Instruments Inc. is an electronics
company that designs and makes
semiconductors. Headquartered at Dallas,
Texas, and is the third largest manufacturer
of semiconductors worldwide.
9. Market Cap $9.5 B
As of December 27, 2014
Price per Share: $45.52
52-Week Range: 37.73 - 49.83
Yield: 3.01%
Average Vol: 3.2 Million
Debt: 1.4 Billion
Equity: 2.3 Billion
Microchip Technology Inc. is a leading
supplier of microcontrollers, or MCUs, which
are semiconductors that act as the brains
within many common electronic devices,
such as remote controls and garage door
openers.
10. Market Cap $30.7 B
As of December 27, 2014
Price per Share: $101.29
52-Week Range: 63.50 - 103.99
Yield: 1.12%
Average Vol: 2.3 Million
Debt: 5.5 Billion
Equity: 3.3 Billion
Avago Technologies Ltd manufactures
semiconductor products such as
optoelectronics, radio-frequency and
microwave components.
12. Key Assumptions
1. High growth rate in the next five years. Then changes to
steady state growth rate
2. Business is not volatile → Risk Premium→ RE
3. Constant Debt Ratio during forecast period
→ DCF and not APV
13. Required Data
Book Values and Weights of Debt & Equity
RE = Cost of Equity
RD = Cost of Debt
g = Growth Rate
High-Growth
Stable-Growth
WACC
14. RD = Cost of Debt
Bond 1 Bond 2 Bond3 Bond 4 Bond 5 Bond 6 Bond 7 Bond 8 Bond 9 Total
YTM 1.12% 2.16% 0.64% 1.52% 2.63% 4.27% 0.67% 4.06% 3.58%
Issue Size 3000 2000 2000 1600 1500 1500 1500 925 750 14775
Percentage of Total 20.30% 13.54% 13.54% 10.83% 10.15% 10.15% 10.15% 6.26% 5.08% 100.00%
Cost of Debt (Weighted Average YTM) 1.98% YTM1 x (B1/Total) +...+ YTM9 x (B9/Total) = RD
● Data from Morningstar ● Issue size in Millions
15. RE = Cost of Equity
Risk-free rate 1.95%
Risk Premium 7.11%
Beta 0.93
Cost of Equity 8.56% RE = Rf + B(Rm- Rf)
● Beta → Finance.Yahoo
● Rf → CNNMoney
○ 10 Year U.S. Treasury Bond
● Risk Premium → HistretSP.xls (Titanium)
○ Arithmetic Average → Not Volatile
○ Geometric → Volatile
Arithmetic Average on Investments in
Year S&P 500
3-month
T.Bill
10-year T.
Bond
1928-2014 11.53% 3.53% 5.28%
1965-2014 11.23% 5.04% 7.11%
2005-2014 9.37% 1.44% 5.31%
16. gH = High-Growth Growth Rate
NET INCOME GROWTH
2014 2013 2012 2011 2010
Net Income $11,704.00 $9,620.00 $11,005.00 $12,942.00 $11,464.00
NI growth $2,084.00 -$1,385.00 -$1,937.00 $1,478.00
growth rate 21.66% -12.59% -14.97% 12.89%
Average NI growth rate 1.75%
REVENUE GROWTH
2014 2013 2012 2011 2010
Revenue $55,870.00 $52,708.00 $53,341.00 $53,999.00 $43,623.00
Revenue change $3,162.00 -$633.00 -$658.00 $10,376.00
Revenue growth 6.00% -1.19% -1.22% 23.79%
Average growth rate 6.84%
Industry Name Number of Firms ROE Retention Ratio Fundamental Growth
Semiconductor 141 20.68% 69.47% 14.37%
Fund. Growth = ROE x Retent. Ratio
Our gh= Average(1.75%,14.37%,6.84%)
gh= 7.65%
17. Other Data
● gs = Steady-state growth rate = 1.95%
→ 10 year U.S. Treasury Bond
● BV of Debt = 13.7 Bil
● BV of Equity = 55.9 Bil
→ Total BV of Capital = 69.9 Bil
(Annual Statement, as of Dec 27, 2014)
● # of Shares Outstanding → 4.75 Bil
● Price per Share (as of 12/27/14) = $37.55
● Market Value of Equity = 4.7 x 37.55 = 178.35Bil
● Tax Rate = 35%
Debt Ratio =
19.68%
Equity Ratio =
80.32%
Debt/ Equity Ratio = 24.5%
18. WACC - Weighted Cost of Capital
WACC = RE x WE + RD x WD x (1-t)
→ = 8.56% x 80.32% + 1.98% x 19.68% x (1-35%)
WACC = 7.13%
19. Summary of Data
# of Shares outstanding 4.75 Billion
Price per Share $37.55
Market Value of Equity 178.35 Billion
BV of Equity 55.9 Billion
BV of Debt 13.7 Billion
Total Capital 69.6 Billion
Weight of equity 80.32%
Weight of debt 19.68%
Cost of Equity 8.56%
Cost of Debt 1.98%
Tax Rate 35.00%
WACC 7.13%
33. - In both DCF and Multiples valuation, the firm
is undervalued
- Intrinsic price/share: $43.12
- Market price/share : $37.55
→ The investors should purchase Intel stocks
Recommendation
