Figure14.

3:FCFEandLeverageSingaporeAirlines

$1.00

$0.90

$0.80

$0.70

$0.60
FCFE

$0.50

$0.40

$0.30

$0.20

$0.10

$0.00
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

DebttoCapitalRatio
 EqValuechart

Figure14.4:SingaporeAirLeverageandValueofEquity

6.00 $1.00

$0.90
5.00

ValueofEquity
$0.80

$0.70
4.00
$0.60
Beta

3.00 $0.50

$0.40
2.00
$0.30

$0.20
1.00
$0.10

0.00 $0.00
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

DebtRatio

ValueofEquity Beta

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 FCFEStableModel

FCFESTABLEGROWTHMODEL

Thismodelisdesignedtovaluetheequityinastablefirmonthebasisof
freecashflowstoequity,especiallywhentheyare
differentfromdividendspaid.

Assumptionsinthemodel:

1.Thefirmisinsteadystateandwillgrowatastablerateforever.

2.Thefirmdoesnotpayoutwhatitcanaffordtoindividends,i.e.,DividendsFCFE.

Userdefinedinputs
Theuserhastodefinethefollowinginputstothemodel:
1.CurrentEarningspershare
2.CapitalSpendingandDepreciationpershare
3.Changeinworkingcapitalpershare
4.Desireddebtlevelforfinancingworkingcapitalandcapitalspendingneeds.
5.CostofEquityorInputstotheCAPM(Beta,Riskfreerate,RiskPremium)
6.ExpectedGrowthRateinfreecashflowstoequityforever.

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 FCFEStableModel

Pleaseenterinputstothemodel:
CurrentNetIncome= (incurrency) {Youcaninputallthenumbersfortheaggregatecompany,ifyousodesire}

CapitalSpending= (incurrency)
Depreciation= (incurrency)
Chg.WorkingCapital= (incurrency)
Doyouwanttooffsetcapitalexpendituresbydepreciationinthefuture? No (YesorNo)

Desireddebtfinancingratio= (inpercent)

Areyoudirectlyenteringthecostofequity?(YesorNo) No
Ifyes,entercostofequity= (inpercent)
Ifno,entertheinputsfortheCAPM
Betaofthestock=
Riskfreerate= (inpercent)
RiskPremium= (inpercent)

ExpectedGrowthRate= (inpercent) Theexpectedgrowthrateforastablefirm

cannotbesignificantlyhigherthanthenominal
growthrateintheeconomyinwhichthefirm
operates.Itcanbelower.

Page4
 FCFEStableModel

Warnings:

Page5
 FCFEStableModel

ThisistheoutputfromtheGordonGrowthModel

FirmDetails:frominputsonpriorpage
CurrentEarningspershare= $0.00 $0.00
(1Desireddebtfraction)* 100.00%
(CapitalSpendingDepreciation) $0.00 $0.00
(1Desireddebtfraction)* 100.00%
WorkingCapital $0.00 $0.00
FreeCashflowtoEquity= $0.00

CostofEquity= 0.00%

ExpectedGrowthrate= 0.00%

FCFEStableGrowthValue= #DIV/0!

Growth rate Value Valuevs.ExpectedGrowth

ValueofStock

4.00% $0.00
3.00% $0.00
$1.00
2.00% $0.00
$0.90
1.00% $0.00
$0.80
0.00% #DIV/0!
$0.70
1.00% $0.00
$0.60
2.00% $0.00
$0.50
3.00% $0.00 $0.40
4.00% $0.00 $0.30
$0.20
$0.10
$0.00
Page6
0 0% 00% 00% 00% 00% 00% 00% 00% 00%
4. 3. 2. 1. 0. 1. 2. 3. 4.
$0.60
$0.50
$0.40
FCFEStableModel
$0.30
$0.20
$0.10
$0.00
% % % % % % % % %
00 00 00 00 00 00 00 00 00
4. 3. 2. 1. 0. 1. 2. 3. 4.

ExpectedGrowthRate

Page7
 FCFEStableModel

DebtRatio FCFE Beta ValueofEquity

0% $0.00 0.81 $0.00
10% $0.00 0.87 $0.00
20% $0.00 0.94 $0.00
30% $0.00 1.03 $0.00
40% $0.00 1.14 $0.00
50% $0.00 1.31 $0.00
60% $0.00 1.56 $0.00
70% $0.00 1.98 $0.00
80% $0.00 2.82 $0.00
90% $0.00 5.33 $0.00

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