Discounted Cash Flow (DCF) Analysis Unlevered

Microsoft Corporation (MSFT)

Technology

Operating Data

Year A/P	2013 Actual	2014 Actual	2015 Actual	2016 Actual	2017 Actual	2018 Actual	2019 Actual	2020 Projected	2021 Projected	2022 Projected	2023 Projected
Revenue	77,849.00	86,832.77	93,579.68	91,155.97	96,570.63	110,360.92	125,844.55	136,528.76	148,120.05	160,695.44	174,338.48
Revenue (%)
EBITDA	30,804.85	33,031.19	24,461.73	32,260.10	38,676.54	46,737.85	55,371.60	51,799.01	56,196.75	60,967.85	66,144.02
EBITDA (%)
EBIT	27,052.53	27,821.22	18,500.70	25,642.17	29,898.27	36,474.28	43,693.23	41,627.62	45,161.80	48,996.04	53,155.80
EBIT (%)
Depreciation	3,752.32	5,209.97	5,961.03	6,617.92	8,778.27	10,263.57	11,678.37	10,171.39	11,034.94	11,971.81	12,988.22
Depreciation (%)

Balance Sheet Data

Year A/P	2013 Actual	2014 Actual	2015 Actual	2016 Actual	2017 Actual	2018 Actual	2019 Actual	2020 Projected	2021 Projected	2022 Projected	2023 Projected
Total Cash	77,023.80	85,712.63	96,527.44	113,243.06	132,977.76	133,768.47	133,823.10	154,140.97	167,227.54	181,425.15	196,828.15
Total Cash (%)
Account Receivables	17,484.89	19,546.06	17,911.15	18,276.77	22,433.36	26,475.58	29,523.13	30,200.16	32,764.15	35,545.83	38,563.67
Account Receivables (%)
Inventories	1,938.44	2,657.08	2,900.97	2,251.55	2,182.50	2,659.70	2,063.85	3,399.57	3,688.19	4,001.32	4,341.03
Inventories (%)
Accounts Payable	5,472.78	7,988.62	6,681.59	7,192.21	7,387.65	8,619.19	9,388.00	10,567.33	11,464.49	12,437.83	13,493.80
Accounts Payable (%)
Capital Expenditure	-4,258.34	-5,487.83	-5,942.31	-8,340.77	-8,131.25	-11,632.04	-13,930.99	-11,181.71	-12,131.03	-13,160.96	-14,278.32
Capital Expenditure (%)

Weighted Average Cost Of Capital

Share price	$ 136.33
Diluted Shares Outstanding	7,753.00
Cost of Debt
Tax Rate	10.18
After-tax Cost of Debt	-0.46
Risk-Free Rate
Market Risk Premium
Cost of Equity	12.14
Total Debt	72,850.00
Total Equity	1,056,966.49
Total Capital	1,129,816.49
Debt Weighting	6.45
Equity Weighting	93.55
Wacc

Build Up Free Cash

Year A/P	2013 Actual	2014 Actual	2015 Actual	2016 Actual	2017 Actual	2018 Actual	2019 Actual	2020 Projected	2021 Projected	2022 Projected	2023 Projected
Revenue	77,849.00	86,832.77	93,579.68	91,155.97	96,570.63	110,360.92	125,844.55	136,528.76	148,120.05	160,695.44	174,338.48
EBITDA	30,804.85	33,031.19	24,461.73	32,260.10	38,676.54	46,737.85	55,371.60	51,799.01	56,196.75	60,967.85	66,144.02
EBIT	27,052.53	27,821.22	18,500.70	25,642.17	29,898.27	36,474.28	43,693.23	41,627.62	45,161.80	48,996.04	53,155.80
Tax Rate	19.18%	20.65%	34.12%	19.89%	14.76%	54.57%	10.18%	24.76%	24.76%	24.76%	24.76%
EBIAT	21,863.43	22,074.97	12,188.85	20,541.54	25,486.67	16,571.13	39,244.70	31,318.93	33,977.90	36,862.63	39,992.27
Depreciation	3,752.32	5,209.97	5,961.03	6,617.92	8,778.27	10,263.57	11,678.37	10,171.39	11,034.94	11,971.81	12,988.22
Accounts Receivable	-	-2,061.17	1,634.91	-365.62	-4,156.59	-4,042.23	-3,047.55	-677.03	-2,563.99	-2,781.68	-3,017.84
Inventories	-	-718.64	-243.89	649.42	69.06	-477.20	595.85	-1,335.72	-288.62	-313.13	-339.71
Accounts Payable	-	2,515.83	-1,307.03	510.62	195.45	1,231.53	768.82	1,179.32	897.17	973.34	1,055.97
Capital Expenditure	-	1,229.49	454.48	2,398.46	-209.52	3,500.79	2,298.95	-2,749.29	949.33	1,029.92	1,117.37
UFCF	25,615.75	28,250.44	18,688.35	30,352.34	30,163.33	27,047.59	51,539.14	37,907.61	44,006.72	47,742.90	51,796.27
WACC
PV UFCF								27,236.43	28,319.41	27,517.89	26,739.06
SUM PV UFCF											197,037.36

Terminal Value

Growth in perpetuity method:
Long-term growth rate
WACC (%)	11.65
Free cash flow (t + 1)	53,868.12
Terminal Value	704,158.40
Present Value of Terminal Value	405,860.45

Intrinsic Value

Enterprise Value	602,897.80
Net Debt	-60,973.10
Equity Value	663,870.90
Shares Outstanding	7,753.00
Equity Value Per Share	85.63

Results Unlevered DCF

Wacc / Long-term Growth	-4 (%)	-3 (%)	-2 (%)	-1 (%)	0 (%)	1 (%)	2 (%)	3 (%)	4 (%)
13.65 (%)	62.92 Sell	65.60 Sell	68.73 Sell	72.46 Sell	76.96 Sell	82.49 Sell	89.48 Sell	98.56 Sell	110.86 Sell
13.15 (%)	61.23 Sell	63.67 Sell	66.51 Sell	69.86 Sell	73.87 Sell	78.76 Sell	84.84 Sell	92.63 Sell	102.95 Sell
12.65 (%)	59.67 Sell	61.90 Sell	64.48 Sell	67.51 Sell	71.10 Sell	75.44 Sell	80.77 Sell	87.51 Sell	96.27 Sell
12.15 (%)	58.23 Sell	60.27 Sell	62.63 Sell	65.37 Sell	68.60 Sell	72.47 Sell	77.18 Sell	83.05 Sell	90.56 Sell
11.65 (%)	56.90 Sell	58.77 Sell	60.92 Sell	63.41 Sell	66.33 Sell	69.80 Sell	73.98 Sell	79.13 Sell	85.63 Sell
11.15 (%)	55.66 Sell	57.39 Sell	59.36 Sell	61.63 Sell	64.27 Sell	67.39 Sell	71.12 Sell	75.67 Sell	81.33 Sell
10.65 (%)	54.51 Sell	56.10 Sell	57.91 Sell	59.99 Sell	62.39 Sell	65.21 Sell	68.55 Sell	72.59 Sell	77.56 Sell
10.15 (%)	53.44 Sell	54.91 Sell	56.58 Sell	58.48 Sell	60.67 Sell	63.22 Sell	66.23 Sell	69.83 Sell	74.22 Sell
9.65 (%)	52.44 Sell	53.81 Sell	55.34 Sell	57.09 Sell	59.09 Sell	61.41 Sell	64.13 Sell	67.36 Sell	71.25 Sell

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