Page 1

INPUTSFORVALUATION
CurrentInputs
Enterthecurrentrevenuesofthefirm=
Entercurrentcapitalinvestedinthefirm=
Enterthecurrentdepreciation=
Enterthecurrentcapitalexpendituresforthefirm=
EnterthechangeinWorkingCapitalinlastyear=
Enterbeginningshareholder'sequity
Enterthevalueofcurrentdebtoutstanding=
Enterthenumberofsharesoutstanding=

$51,584
$172,101 {Asanaveestimate,youcanuseBVofdebt+BVofEquity)
$6,410
$1,441
$(2,767)
$81,260
$95,481
6,813.00

HighGrowthPeriod

YourInputs

Enterthegrowthrateinrevenuesforthenext5years=

15.00%

Whatwillalloperatingexpensesbeasa%ofrevenuesinthefifthyear?

75.00% (Operatingexpensesincludedepreciation:Thisisequalto(1PretaxOperatingMargin))

Howmuchdebtdoyouplantouseinfinancinginvestments?
Enterthegrowthrateincapitalexpenditures&depreciation

35%
5.27%

Enterworkingcapitalasapercentofrevenues

63.74%

Enterthetaxratethatyouhaveoncorporateincome

27.00%

Whatbetadoyouwanttousetocalculatecostofequity=

1.35

Enterthecurrentlongtermbondrate=

4.20%

Enterthemarketriskpremiumyouwanttouse=

5.50%

Enteryourcostofborrowingmoney=

4.20%

StablePeriod
Enterthegrowthrateinrevenues=

7.00%

Enteroperatingexpensesasa%ofrevenuesinstableperiod=

70.00%

Entercapitalexpendituresasapercentofdepreciationinthisperiod

22.48%

Howmuchdebtdoyouplantouseinfinancinginvestments?

10.00%

Page 1

Page 2

Enterinterestrateofdebtinstableperiod=

4.00%

Whatbetadoyouwanttouseinthestableperiod=

1.25
ESTIMATEDCASHFLOWS

Base

10

GrowthinRevenue

15.00%

15.00%

15.00%

15.00%

15.00%

13.40%

11.80%

10.20%

8.60%

7.00%

GrowthinDeprec'n

5.27%

5.27%

5.27%

5.27%

5.27%

5.62%

5.96%

6.31%

6.65%

7.00%

Revenues

$51,584 $59,322 $68,220 $78,453 $90,221 $103,754 $117,657 $131,540 $144,957 $157,424 $168,444

OperatingExpenses
%ofRevenues

75.00%

75.00%

75.00%

75.00%

75.00%

75.00%

74.00%

73.00%

72.00%

71.00%

70.00%

$OperatingExpenses

$38,688 $44,491 $51,165 $58,840 $67,666 $77,815 $87,066 $96,024 $104,369 $111,771 $117,910

EBIT

$12,896 $14,830 $17,055 $19,613 $22,555 $25,938 $30,591 $35,516 $40,588 $45,653 $50,533

TaxRate

27.00%

27.00%

27.00%

27.00%

27.00%

27.00%

27.00%

27.00%

27.00%

27.00%

27.00%

Endingequity

$90,674 $101,500 $113,950 $128,268 $144,733 $163,668 $186,000 $211,926 $241,556 $274,882 $311,771

EBIT(1t)

$9,414 $10,826 $12,450 $14,318 $16,465 $18,935 $22,331 $25,927 $29,629 $33,327 $36,889

+Depreciation

$6,410 $6,748 $7,103 $7,478 $7,872 $8,287 $8,752 $9,274 $9,859 $10,515 $11,251

CapitalExpenditures

$1,441 $1,517 $1,597 $1,681 $1,770 $1,863 $1,996 $2,129 $2,263 $2,396 $2,529

ChangeinWC

$(2,767) $4,932 $5,671 $6,522 $7,500 $8,626 $8,861 $8,849 $8,552 $7,946 $7,024

Page 2

Page 3

=FCFF

$17,150 $11,125 $12,285 $13,592 $15,067 $16,733 $20,226 $24,222 $28,674 $33,500 $38,587

TerminalValue(in'05)

$1,266,708
COSTSOFEQUITYANDCAPITAL
2

CostofEquity

1
11.63%

11.63%

11.63%

11.63%

11.63%

11.52%

11.41%

11.30%

11.19%

11.08%

ProportionofEquity

65.00%

65.00%

65.00%

65.00%

65.00%

70.00%

75.00%

80.00%

85.00%

90.00%

3.07%

3.07%

3.07%

3.07%

3.07%

3.04%

3.01%

2.98%

2.95%

2.92%

35.00%

35.00%

35.00%

35.00%

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

AftertaxCostofDebt
ProportionofDebt
CostofCapital

10

8.63%

8.63%

8.63%

8.63%

8.63%

8.97%

9.31%

9.63%

9.95%

10.26%

CumulativeWACC

108.63%

118.00%

128.19%

139.25%

151.26%

164.83%

180.17%

197.53%

217.18%

239.46%

CumulativeCostofEquity

111.63%

124.60%

139.09%

155.26%

173.30%

193.26%

215.30%

239.62%

266.42%

295.93%

PresentValue

$10,242 $10,411 $10,603 $10,820 $11,062 $12,270 $13,444 $14,516 $15,425 $545,094

FIRMVALUATION
ValueofFirm

$653,888

ValueofDebt

$95,481

ValueofEquity

$558,407

ValueofEquityperShare

$81.96

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

ValueofFirmbyyear

$653,888 $699,189 $747,239 $798,129 $851,935 $908,718 $970,018 $1,036,063 $1,107,179 $1,183,840

$ValueofDebt

$228,860.79 $244,716 $261,534 $279,345 $298,177 $272,615 $242,505 $207,213 $166,077 $118,384

Page 3

DAE Valuation

EBIT(1t)
WACC(CI)
AbnormalEarnings
TerminalAE
PV
PVofAE
+CapitalInvested
+PVofChgCapitalinYr10
=FirmValue

IndicatedPricepershare
CostofEquity
ROC
CapitalInvested
CalculationofCapitalInvested
Initial
+NetCapEx
+ChginWC
Ending
CumulatedCostofEquity

Base
1
2
3
4
$9,414 $10,826 $12,450 $14,318 $16,465
$20,007 $19,972 $19,991 $20,075
$(9,181) $(7,522) $(5,673) $(3,610)
$(8,451) $(6,374) $(4,426) $(2,593)
$541,917
$172,101
$(85,668) Thisreconcilestheassumptionsonstablegrowth,ROCandCapitalInvested

$628,350
$92.23
11.63%
11.63%
11.63%
11.63%
6.29%
7.25%
8.33%
9.53%
$172,101 $171,802 $171,967 $172,692

$172,101 $172,101
$(5,231)
$4,932
$172,101 $171,802

$171,802
$(5,507)
$5,671
$171,967

$171,967
$(5,797)
$6,522
$172,692

$172,692
$(6,102)
$7,500
$174,090

108.63%

118.00%

128.19%

139.25%

Page 4

DAE Valuation

5
6
7
8
9
10
$18,935 $22,331 $25,927 $29,629 $33,327 $36,889
$20,238 $20,300 $20,346 $20,343 $20,251 $20,033
$(1,303) $2,031 $5,580 $9,287 $13,075 $16,856
$1,299,160
$(861) $1,232 $3,097 $4,702 $6,020 $549,571

andCapitalInvested

11.63%
11.52%
11.41%
11.30%
11.19%
11.08%
10.88%
12.67%
14.53%
16.45%
18.41%
20.39%
$174,090 $176,292 $178,398 $180,102 $181,058 $180,884

$174,090
$(6,424)
$8,626
$176,292

$176,292
$(6,756)
$8,861
$178,398

$178,398
$(7,144)
$8,849
$180,102

$180,102
$(7,596)
$8,552
$181,058

$181,058
$(8,119)
$7,946
$180,884

$180,884
$(8,722)
$7,024
$179,186

151.26%

164.83%

180.17%

197.53%

217.18%

239.46%

Page 5

DAE Valuation

TerminalYear
$39,471
$(2,875)
$42,346

0.00%
152.06%
$(25,957) (AdjustedtoreflectterminalROC)

Page 6

DAROE
1
Forecast ROE
0.11939677
Cost of Equity
11.63%
Abnormal ROE
0.31%
Present Value of AROE
0.28%
Total DAROE
115.76%
Beginning Equity
$
81,260
FirmValue
$
94,070
Indicated value per sh $
13.81

2
0.12266096
11.63%
0.64%
0.51%

3
4
0.125648 0.128366239
11.63%
11.63%
0.94%
1.21%
0.68%
0.78%

TerminalYear
5
6
7
8
9
10
0.130827358 0.136442183 0.139390615 0.139809524 0.137966697 0.134199763
11.63%
11.52%
11.41%
11.30%
11.19%
11.08%
1.46%
2.13%
2.53%
2.69%
2.61%
2.34%
2.34%
0.84%
1.11%
1.19%
1.14%
1.01%
0.82%
7.41%

Buffett Valuation Worksheet (January/February 1998, Computerized Investing, www.aaii.com)

Enter values into shaded cells
Date of Analysis: 12/31/2013
Current Stock Data
Company: Pfizer Inc.
Ticker: PFE
Price: $30.38
EPS: $3.23
DPS: $0.96
BVPS: $11.20
P/E: 9.4
Earnings Yield: 10.6%
Dividend Yield: 3.2%
P/BV: 2.7
Gv't Bond Yield: 2.7%

Historical Company Data

Year
Year 8
Year 7
Year 6
Year 5
Year 4
Year 3
Year 2
Year 1

EPS

DPS
1.96
1.28
1.03
1.23
1.20
1.18
2.67
1.10

0.88
0.80
0.72
0.80
1.28
1.16
0.96
0.76

EPS
DPS
Annually Compounded Rates of Growth (7 year)
-7.9%
-2.1%
Annually Compounded Rates of Growth (3 year)
-2.9%
-16.0%

BVPS
10.92
10.51
10.93
12.85
8.56
9.40
9.85
8.92

Price
High
25.10
21.85
17.59
18.48
17.97
22.93
26.17
23.47

BVPS

High Price

-2.9%

-1.0%

1.4%

9.3%

Projected Company Data Using Historical Earnings Growth Rate

Year
Current
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10

EPS
$3.23
2.97
2.74
2.52
2.32
2.14
1.97
1.81
1.67
1.54
1.42

DPS
2.34
2.16
1.99
1.83
1.68
1.55
1.43
1.31
1.21
1.11
1.03

1.42
17.64
$23.03
$40.67
3.0%

Projected Company Data Using Sustainable Growth Rate

Year
Current
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10

BVPS
$11.20
11.63
12.07
12.53
13.01
13.51
14.02
14.56
15.12
15.69
16.29

EPS
1.56
1.61
1.68
1.74
1.81
1.88
1.95
2.02
2.10
2.18
2.26

DPS
1.13
1.17
1.22
1.26
1.31
1.36
1.41
1.47
1.52
1.58
1.64

2.26
15.06
$36.82
$51.88
5.5%

zed Investing, www.aaii.com)

Seven Year Averages

Return on Equity:
Payout Ratio:
P/E Ratio-High:
P/E Ratio-Low:
P/E Ratio:
Sustainable Growth
(ROE * (1 - Payout Ratio))

Low
24.63
21.48
17.43
18.19
17.57
22.69
25.82
23.21

P/E Ratio
High

13.9%
72.5%
16.4
16.2
16.3
3.8%

Low
12.8
17.1
17.1
15.0
15.0
19.4
9.8
21.3

12.6
16.8
16.9
14.8
14.6
19.2
9.7
21.1

Low Price
[(Year 1 / Year 8) ^ (1/7)] - 1
-0.8%
[(Year 1 / Year 4) ^ (1/3)] - 1
9.7%

ROE
18.0%
12.2%
9.4%
9.6%
14.0%
12.6%
27.1%
12.3%

Payout
Ratio
44.9%
62.5%
69.9%
65.0%
106.7%
98.3%
36.0%
69.1%

Earnings after 10 years

Sum of dividends paid over 10 years
Projected price (Average P/E * EPS)
Total gain (Projected Price + Dividends)
Projected return using historical EPS growth rate
[(Total Gain / Current Price) ^ (1/10)] - 1

Earnings after 10 years (BVPS * ROE)

Sum of dividends paid over 10 years
Projected price (Average P/E * EPS)
Total gain (Projected Price + Dividends)
Projected return using sustainable growth rate
[(Total Gain / Current Price) ^ (1/10)] - 1

Notes
calculating changes in working capital
2013
56,244
23,366
32,878
-2,767

2012
64,831
29,186
35,645

2013
Long-term investments
$16,406
Property, plant and equipment, less accumulated
12,397
Total
28,803
Current capital expenditure
1,441

2012
$14,149
13,213
27,362

Total current asstes

Total current liabilities
net working capital
changes
Calculating current capital expenditures

growth rate in capital expenditure and depreciat

accumulated depreciation
Capital expenditure as percentage of depreciati

0.0527
$6,410
22.48%

BVPS = Shareholders' equity/shares outstanding

TOTAL SHAREHOLDERS EQUITY

2013

Shares Outstanding at FYR end

BVPS

$7,655

2012

76,307.000 81,260.000
6,813.000 7,442.000
11.200205 10.919108

Long term bond rate = interest expense/long term debt = 1,368/ 32,522 = 4.2%

References

Government bond yield, retrieved from: http://www.bloomberg.com/markets/rates-bonds/

Share prices, retrieved from: http://finance.yahoo.com/q/hp?s=PFE&a=11&b=27&c=2005&
2007 Financial statements from: http://www.pfizer.com/files/annualreport/2007/financial/fina
2010 Financial statements from: http://www.pfizer.com/files/annualreport/2010/financial/fina
2013 Financial statements from: http://www.pfizer.com/files/investors/presentations/Financi

2011

2010

2009

2008

2006
2005
71,358 65,627.000
82,190.000 87,813.000 90,014.000 57,556.000
7,242
7,361
7,817.000
8,036.000
7,007.000
6,727.000 6,917.000
10.514264 10.927451 12.846297 8.5559685 9.398583 9.853355 8.9155006

68/ 32,522 = 4.2%

.com/markets/rates-bonds/
=PFE&a=11&b=27&c=2005&d=00&e=2&f=2006&g=d
nualreport/2007/financial/financial2007.pdf
nualreport/2010/financial/financial2010.pdf
vestors/presentations/FinancialReport2013.pdf

2007
65,010