Microsoft Corporation (MSFT) Simple Excess Return Model - Discounting Cash Flows
MSFT
Microsoft Corporation
MSFT (NASDAQ)

Estimated Value

USD

Market Price USD

* Values are not guaranteed, please do your own
research before making investment decisions.

Simple Excess Return Model

Used to estimate the value of companies that have reached maturity and earn stable excess returns with little to no high growth chance. Excess Return models are better suited to calculate the intrinsic value of a financial company than an enterprise valuation model (such as the Discounted Free Cash Flow Model).

See our GitHub Documentation

Interactive Assumptions

Discount Rate

Discount Rate

Discount Rate = Cost of Equity = Risk Free Rate + Beta * Market Premium

The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula.

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↳ Beta

Beta

Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.

↳ Risk Free Rate

Risk-Free Rate

The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.

↳ Market Premium

Market Premium

Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.

Return On Equity

Return on Equity

Return On Equity (ROE) is used to estimate the Earnings Per Share (EPS) expressed as a percentage of Book Value.

Growth In Perpetuity

Growth in Perpetuity

The rate at which the company's free cash flow is assumed to grow in perpetuity. By default, this is equal to the yield of the U.S. 10 Year Treasury Bond.

Historical Years

Historical Years

The number of historical years used to calculate averages for historical data.

Results

Estimated Value 274.5 USD
Book value of equity invested 43.3 USD
Next year's estimated book value 37.7 USD
Present value of future excess returns 231.2 USD
Excess Return per share 10.27 USD
Cost of Equity (the discount rate) 8.79%
Average historical Return on Equity 37.22%
Average historical Payout Ratio 45.6%
Payout Ratio used 88.31%
Risk Free Rate of the 10 Year U.S. Treasury Note 4.35%

Historical and Forecasted Data

Monetary values are in USD

amounts of USD except for #

2024 LTM 2025 2026 2027 2028 2029
Beginning Book Value 27.7 36.13 36.13 37.7 39.34 41.05 42.84
Ending Book Value 36.13 43.3 37.7 39.34 41.05 42.84 44.7
EPS 11.86 12.99 13.45 14.03 14.64 15.28 15.94
Return on Equity 42.74% 35.99% 37.22% 37.22% 37.22% 37.22% 37.22%
Dividend per Share 3.08 3.32 11.88 12.39 12.93 13.49 14.08
Retained Earnings 8.78 9.67 1.57 1.64 1.71 1.79 1.86
Equity Cost per Share 2.44 3.18 3.18 3.32 3.46 3.61 3.77
Cost of Equity 8.79% 8.79% 8.79% 8.79% 8.79% 8.79% 8.79%
Excess Return 9.42 9.81 10.27 10.72 11.18 11.67 12.18

amounts of USD except for #

Average LTM 2024 2023 2022 2021 2020 2019 2018 2017 2016 2015
Net Income 49,950 96,635 88,136 72,361 72,738 61,271 44,281 39,240 16,571 25,489 20,539 12,193
Total Equity 149,842 321,891 268,477 206,223 166,542 141,988 118,304 102,330 82,718 87,711 71,997 80,083
Return on Equity 37.22% 35.99% 42.74% 43.45% 51.23% 51.79% 43.27% 47.44% 18.89% 35.4% 25.65% 13.58%
Dividends Paid to Common Shareholders 16,628 24,681 22,887 20,774 19,040 17,358 15,905 14,502 13,244 12,316 11,650 10,548
Payout Ratio 45.6% 25.56% 25.97% 28.7% 26.19% 28.33% 35.91% 36.99% 80% 58.03% 69.34% 86.58%
Shares Outstanding 7,653 7,434 7,431 7,446 7,496 7,547 7,610 7,673 7,700 7,746 7,925 8,177
EPS 6.53 12.99 11.86 9.72 9.7 8.12 5.82 5.11 2.15 2.74 2.12 1.49
Dividend per Share 2.19 3.32 3.08 2.79 2.54 2.3 2.09 1.89 1.72 1.59 1.47 1.29
Book Value 19.82 43.3 36.13 27.7 22.22 18.81 15.55 13.34 10.74 11.32 9.08 9.79
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Discounting Cash Flows

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