Home FED+ Basics
Future Earnings Discounted Plus Equity Model PDF Print E-mail
Written by Dr. Econ   
Wednesday, 13 July 2011 00:00

There are many different ways to estimate the fair value of a company. I look at it from a financial engineering perspective. Let’s say there is a project. You invest your capital in the project. You expect the project to make a minimum return for your investment. At the same time, you need to know what the downside of the project is. In the worst case, you will lose your money up to the equity value. Thus, the companies already have this equity in them. By purchasing a stock, you pay for the rest.

The companies make profit. They are supposed to make profits. If they do not, make sure to stay away from the company. As a shareholder, you are the owner and at least theoretically you are entitled to receive the profits. I would rather prefer it in my pocket in form of a dividend check, but still it is in the company’s account which I am entitled a portion of. The profits continue growing in the long term. However, analysts have almost no idea about what will be the profit growth after 5 years. Therefore 5 years is a good cut-off point for the profits. The company still keeps making profits, but we assume the profits to stay constant.

Based on the above logic FED+ Fair Value is calculated as the following:

Fair Value = E0 + E1 / (1+r) + E2 /(1+r)2 + E3/(1+r)3 + E4/(1+r)4 + E5/(1+r)5 + Disposal Value

Fair Value = E0 + E0 (1+g)/(1+r) + E0(1+g)2/(1+r)2 + … + E0(1+g)5/(1+r)5 + E0(1+g)5/[r(1+r)5]

The earnings after the last period act as a perpetuity that creates regular earnings:

Disposal Value = D = E0 (1+g)5/[r(1+r)5] = E5 / r

Fair Value = E0 + E0 (1+g)/(1+r) + E0(1+g)2/(1+r)2 + … + E0(1+g)5/(1+r)5 + E5 / r

FileDescriptionUploaderFile sizeLast modified
Download this file (FairValueFinalWeb.xlsx)FED+ Fair Value EstimatorDownload Excel FileDr. Econ14 Kb22/08/11 22:29
Last Updated on Thursday, 06 October 2011 06:51


0 #62 Andre 2015-08-22 04:54
I loved as much as you will receive carried out right here.
The sketch is attractive, your authored material stylish.
nonetheless, you command get got an edginess over
that you wish be delivering the following.
unwell unquestionably come more formerly again as exactly the same nearly a lot often inside case you shield this hike.

Feel free to visit my web blog - lolatoys.com: http://lolatoys.com/es/we-vibe-4-plus.html
0 #61 Ezequiel 2015-08-21 09:39
An impressive share! I have just forwarded this onto a colleague who had
been conducting a little research on this. And he in fact bought me lunch due
to the fact that I stumbled upon it for him... lol.
So let me reword this.... Thank YOU for the meal!!
But yeah, thanks for spending some time to discuss this topic here on your blog.

Here is my homepage vibradores lelo: http://lolatoys.com/es/liv-2.html
0 #60 Amos 2015-08-21 08:13
Hello, i believe that i noticed you visited my web site so i got here to go
back the choose?.I'm attempting to in finding issues to enhance my web site!I assume its adequate to make use of a few of your ideas!!

My webpage :: el mejor vibrador: http://lolatoys.com/es/gigi-2.html
0 #59 Renate 2015-08-20 23:26
Keep this going please, great job!

Check out my website ... We-Vibe 4 amazon: http://Lolatoys.com/es/we-vibe-4-plus.html
0 #58 Rosalina 2015-08-20 15:09
This is the right web site for anyone who would like to understand this
topic. You understand so much its almost tough to argue with
you (not that I actually would want to…HaHa).

You definitely put a new spin on a topic which has been discussed for years.
Great stuff, just wonderful!

My website ... We-Vibe 4 Plus amazon: http://lolatoys.com/es/we-vibe-4-plus.html
0 #57 Marilou 2015-08-20 05:53
Every weekend i used to visit this web site, as i wish for enjoyment, for the reason that this this web page conations actually
fastidious funny information too.

Look into my weblog: We-Vibe 4 Plus amazon: http://Lolatoys.com/es/we-vibe-4-plus.html
0 #56 Delores 2015-08-20 00:51
I like the helpful info you provide in your articles.
I will bookmark your blog and check again here regularly.
I'm quite sure I'll learn a lot of new stuff right here!
Best of luck for the next!

Feel free to surf to my site vibradores lelo: http://lolatoys.com/es/gigi-2.html
0 #55 Erna 2015-08-19 19:41
We are a gaggle of volunteers and starting a brand new
scheme in our community. Your site offered us with useful information to work on. You have done a formidable job and our whole group shall be thankful to you.

Here is my web-site vibrador lelo: http://Lolatoys.com/es/ina-2.html
0 #54 Yvette 2015-08-19 15:14
Hi there i am kavin, its my first occasion to commenting anywhere, when i read this
post i thought i could also make comment due to this brilliant paragraph.

My web page :: lolatoys.com: http://Lolatoys.com/es/we-vibe-4-plus.html
0 #53 Carina 2015-08-19 10:40
I visited many sites however the audio quality for audio songs existing at this web site
is actually fabulous.

Feel free to surf to my blog post - vibradores dobles: http://lolatoys.com/es/dobles.html

Add comment

Comments are greatly appreciated.

Security code

. .