Note. 'FCFF' stands for Free Cash Flow to the Firm.
Note. 'EBIT' stands for Earnings Before Interest and Taxes.
\[ \text{Terminal Cash Flow} = \text{Terminal Year FCFF} = \text{Terminal Year EBIT(1 - t)} - \text{Reinvestment}. \]
\[ \text{Terminal Value} = \frac{\text{Terminal Cash Flow}}{\text{Terminal Cost of Capital} - \text{Terminal Year Growth Rate}}. \]
\[ \text{PV(Terminal Values)} = \text{Terminal Values}\times \text{10th year calculated discount factor}. \]
\[ \text{Terminal Values} = \text{1st year PV (FCFF)} + \text{2nd year PV (FCFF)} + \dots + \text{10th year PV (FCFF)}. \]
\[ \text{Sum of PV} = \text{PV(terminal Values)} + \text{PV(CF over next 10 years)}. \]
\[ \text{Value of Operating Assets} = \text{Sum of PV}\times(1 - \text{Probability of Failure}) + \text{Proceeds of Firm Fails}\times\text{Probability of Failure}. \]
Non-operating Assets usually refers to Cross holdings and other non-operating assets on the balance sheet.
Cash usually refers to Cash and Cash Equivalents on the balance sheet.
Debt usually refers to Book Value of Debt.
Minority interest, also referred to as non-controlling interest (NCI), is the share of equity ownership in a subsidiary’s equity that is not owned or controlled by the parent corporation.
Note. Some companies may not have minority interest/NCI.
\[ \text{Value of Equity} = \text{Value of Operating Assets} + \text{Value of Non-Operating Assets} + \text{Cash} - \text{Debt} - \text{Minority Interest}. \]
\[ \text{Value of Equity in Common Stock} = \text{Value of Equity} - \text{Value of Options}. \]
\[ \text{Value per Share} = \frac{\text{Value of Equity in Common Stock}}{\text{Number of Shares}} \]