Question

The Walt Disney company’s intrinsic value for 2018 using the discount valuation techniques

Calculate the Intrinsic Value of The Walt Disney Company:

You will use the Discounted Cash Flow (DCF) valuation model to calculate the intrinsic value of the Walt Disney company. This model involves three primary steps: i) calculating the company's cost of capital, ii) calculating the free cash flows to the firm, and ii) applying the time-value-of-money concept to discount your projected cash flow values back to the present using the company's cost of capital as the discount rate.

Calculating the Cost of Capital:

The company's cost of capital can be calculated using the Weighted Average Cost of Capital (WACC) formula:

WACC = D/V * eD *(1-Tc) + E/V * rE

Using the website, ThatsWACC (www.thatswacc.com), enter your company's "ticker symbol", identify the relevant terms from above and calculate the WACC (please show your calculations).

Calculating Free Cash Flow to the Firm:

Estimate the free cash flows available to the firm ("FCFF"). To do this we can use the below formula:

FCFF = Cash Flow from Operations - Capital Expenditures + Interest * (1 - Tax Rate)

The Cash Flow from Operations and Capital Expenditures can be found on the Statement of Cash Flows in Yahoo! Finance.

The Interest expense (if any exists) is on the Income Statement.

The Tax Rate is the one you used to calculate the WACC, above.

For additional details on these calculations please refer to this external resource.

Calculating Firm Value:

You can now combine the two items above to estimate a present value of the firm. To simplify this calculation you should assume a constant growth rate of 3% in the Free Cash Flows to the Firm and apply the constant growth model:

Firm Value = FCFF * (1+g) / (WACC - g)

Answer 1