Intel Financial Analysis

Topics: Financial ratios, Financial ratio, Balance sheet Pages: 9 (549 words) Published: October 18, 2013
﻿Cost of bonds (Rd)
(1-.26)(2.503%) = 1.85% cost of bonds/ debt

Does the company have any preferred stock? If so, calculate Rps Intel does not have any preferred stock.

Estimate the cost of common stock Rs using CAPM (aka, the required return)
http://finance.yahoo.com/bonds
dividend and yield=4.20%(on yahoo finance summary for intel page) CAPM
Rs=Rf+Beta(E(RM)-Rf)
10 year Treasury bond rate Rf= 1.81%
Beta =0.98
10 year (2003-2013) arithmetic average of S&P500 = 5.69%
MRP= 6.675 – 1.81 =4.86%
Calculate beta using monthly returns for the past 24 months and the market model. Tell me a little bit about R2, R2 for this company, and what it means.
Beta= 0.91
Rs = 1.81+ 0.91(4.86) = 6.23%
R squared = 0.293879903 (SPY as Benchmark)
2.3 WACC estimation
Compute WACC
WACC = wd rd (1-T) + wps rps + ws rs
= (13.3B/64.6B*1.85) + 0 + 51.2B/64.6B* 6.23%
= 5.3%
Investors use WACC to help decide whether a company represents a good investment opportunity. To some extent, WACC represents the rate at which a company produces value for investors—if a company produces a return of 20% and has a WACC of 11%, then the company creates 9% additional value for investors. If the return is lower than the WACC, the business is unlikely to secure investment. Also compute WACC using the arithmetic average of Rs from my website. Rs for Technology sector is 16.27%

WACC = 13.3B/64.6B*1.85 * (1-26%) + 0 + 51.2B/64.6B* 16.27%
= 13.28%
Tell me which WACC makes more sense to you, using required Rs or the arithmetic average Rs, and why. Bear in mind that the number chosen should be commensurate with risk.

WACC of 5.3% makes more sense because the WACC of 13.28 is influenced InfoTech, the dot-com run up prior to 2000 appears to be the reason for the high cross-sectional average Rs of 16.27%.

3.1 Financial statement analysis
Compute liquidity, asset management, debt management, proﬁtability, market value, and DuPont measures for the company. (FSA)
G, OP and CR on page 193-199 of efficient minds

Calculation
Liquidity

Current Ratio
=31,358,000/ 12,898,000
=2.43

Quick Ratio
=(31,358,000- 4,734,000) / 12,898,000
=2.064
Asset Management Ratios

Inventory Turnover Ratio
=53,341,000/4,734,000
=11.27
Total Assets Turnover Ratio
=53,341,000/84,351,000
=0.632
Debt Management Ratios

Debt Ratio
=33,148,000/84,351,000
=0.393
Times Interest Earned
= 14873000/90000
=165.26
Profitability Ratios

Profit Margin on sales
=11005,000/53,341,000
=20.63%
Basic Earning Power ratio
=14,873,000/84,351,000
=17.63%
Return on total assets
=11005,000/84,351,000
=13.05%
Return on Equity
=11,005,000/51,203,000
=21.5%
Market Value Ratios

Price/Earnings Ratio
=21.93/2.13
=10.30
Price/Cash Flow Ratio
=21.93/3.68
=5.96
Market/Book Ratio
=21.93/10.36
=2.12
Du Pont

ROE
=20.63%*0.632*1.65
=21.5%

NOPAT=14,873,000(1-.26)

Measure
Description
Intel
(INTC)
PacMOS
(1010.HK)
Avago
(AVGO)
Taiwan Semi
(TSMN.MX)
Industry
Remarks
Liquidity

Current Ratio
current assets / current liabilities.
=31,358,000/ 12,898,000
=2.43

19.28
6.18
1.77
3.24
Low
Quick Ratio
(Current Assets – Inventories) / current liabilities.
=(31,358,000- 4,734,000) / 12,898,000
=2.064
18.71
4.33
1.50
2.57
Low
Asset Management Ratios

Inventory Turnover Ratio
CGS/Inventory
=20,190,000/4,734,000
=4.26
0.75
1.55
6.94
5.76
Low
Days Sales Outstanding
Receivables/(Annual sales/365)
=5,950,000/(53,341,000/365)
=40.71
99.54
52.65
37.30

Ok
DSI
Inventories/(Annual Sales/365)
=4734000/(53,341,000/365)
=32.39
132.72
29.95
27.27

AVG
Total Assets Turnover Ratio
Sales/Total Assets
=53,341,000/84,351,000
=0.632
0.08
0.83
0.53
0.80
Low
Debt Management Ratios

Debt Ratio
Total Liabilities/Total Assets
=33,148,000/84,351,000
=0.39
0.06
0.15
0.24

AVG
(Medium Risk)
Times Interest Earned
EBIT/Interest Expense
=...