Tendencias en el desarrollo de plantaciones.

Total Liabilities Computed Interest Rate Value Weighted Rate Current liabilities: Short-term debt $178,000,000 1.86% 0.00% 0.00%

Long-term debt reclassified to short-term debt $33,000,000 2.12% 7.11% 0.15%

Accounts payable $1,943,000,000 20.32% 0.00% 0.00%

Accrued compensation and benefits $1,858,000,000 19.43% 0.00% 0.00% Deferred income on shipments to distributors $592,000,000 6.19% 0.00% 0.00%

Accrued advertising $894,000,000 9.35% 0.00% 0.00%

Other accrued liabilities $1,355,000,000 14.17% 0.00% 0.00% Income taxes payable $1,163,000,000 12.16% 0.00% 0.00%

Total current liabilities $8,006,000,000 83.71% 0.00%

Long-term debt $703,000,000 7.35% 7.11% 0.52%

Deferred tax liabilities $855,000,000 8.94% 0.00% 0.00%

Product Warranties $0 0.00% 0.00% 0.00%

Commitments and contingencies $0 0.00% 0.00% 0.00%

Total non-current liabilities $1,558,000,000 16.29% 0.00%

Total Liabilities $9,564,000,000 100.00% 14.22% 0.67%

Weighted Average cost of Debt 0.67%

Ke Calculation

To calculate Intel’s cost of equity, we used the CAPM method. A detailed view of the CAPM calculations can be found in appendix C. According to our calculated R-Squares, our five year beta calculation was our best option. Using this beta, our cost of equity calculation was as follows:

Average Risk Free Rate Estimated Beta Hisorical Market Price Premium Average Risk Free Rate Ke

Method of Comparables

This section will give us values based on the industry average of Intel’s strongest competitors. We will compare Intel to its two chief competitors Texas Instruments and Amd.

In this portion of our valuation we have valued Intel’s stock price based on the industry average of numbers in the year 2004. We did this by using several price multiples beginning with the price/earnings ratio. According to our calculations there is much room to grow as our assumed price per share

according to the P/E ratio reaches $51.40. This number may be a bit skewed though as AMD has a rather high P/E ratio in comparison to the industry.

Price to Earnings Ratio

Company PPS EPS P/E Ratio Texas Instruments 24.96 1.08 23.11

Amd 16.19 0.25 64.76

Intel 23.01 1.17 19.67 Industry Average P/E Intel's Expected Share Price

43.94 $51.40

The expected share price found was $51.40. Intel's actual share price is $23.01, therefore Intel is undervalued according to this model.

The M/B ratio is much more symmetrical across the industry as all three competitors lie within 1.1 of each other and according to this ratio Intel has the most room to grow because they have the highest P/B multiple. This calculation also implies Intel is overvalued slightly as the price per share is only $18.60.

Market to Book Ratio

Company PPS BPS M/B Ratio Texas Instruments 24.96 7.52 3.32

Amd 16.19 6.22 2.60

Intel 23.01 6.28 3.66 Industry Average M/B Intel's Expected Share Price

2.96 $18.60

The Dividend/Price ratio isn’t very accurate due to AMD not paying out dividends and TXI paying out less than Intel. The industry average is based on TXI alone and that causes this number to be distorted at a price per share of $44.37.

Dividend to Price Ratio

Company DPS PPS D/P Ratio Texas Instruments $0.09 $24.96 0.004

Amd N/A $16.19 N/A

Intel $0.16 $23.01 0.007 Industry Average D/P Intel's Expected Share Price

0.004 $44.37

The expected share price found was $44.37. Intel's actual share price is $23.01, therefore Intel is undervalued according to this model.

The Price/Sales ratio indicates that Intel is way overvalued as it depicts the PPS to be only $12.33. This price is small because Intel has a significantly higher amount of shares outstanding than its competitors, which drives down the SPS number while increasing the Price/Sales ratio. Intel pays out significantly more than its competition.

Price to Sales Ratio

Company PPS SPS P/S Ratio

Texas Instruments $24.96 7.24 3.45

Amd $16.19 13.93 1.16

Intel $23.01 5.35 4.30

Industry Average P/S Intel's Expected Share Price

2.30 $12.33

The expected share price found was $12.33. Intel's actual share price is $23.01, therefore Intel is overvalued according to this model.

In our Price Earnings Growth model we used a forward P/E ratio and divided that by our forecasted earnings per share growth to get the PEG ratio of each company. Once again we found out the industry average PEG then

multiplied that by our forecasted earnings per share growth to get an expected share price of $24.33. The share price this model gave us was the closest we have found to our actual market price, we feel that this was the most accurate multiple of the six methods we used.

Price Earnings Growth Ratio

Company P/E EPS Growth PEG Ratio Texas Instruments 21.24 14.45 1.47

Amd 59.87 18.27 3.28

Intel 15.34 11.78 1.30 Industry Average PEG Intel's Expected Share Price

2.37 $24.27

The expected share price found was $24.33. Intel's actual share price is $23.01, therefore Intel is undervalued according to this model.

Discounted Dividend Model

When looking at the discounted dividend model (appendix D), our first step was to find the dividends per share. In looking at Yahoo! Finance we find that dividends are .32 per share. So for the first two years our dividends per share are .32, they grow every two years to .40, then to .48, to 56, to 64 and finally to.72 which we believe will be our terminal dividend per share. According to this model of valuation, Intel is currently overvalued at a value of $8.53. Although this is the not the only model presenting this conclusion, it is the lowest value compared to all the models which we feel is due mainly in part to Intel’s low dividend yield. In the sensitivity analysis we forecast what will happen if

growth occurs and also if cost of equity increases. Looking at the sensitivity analysis we find that the blue shading is what our actual estimated value per share is and the yellow area is where we don’t want to be, which is below the actual value. If growth was to increase to 3% and/or the cost of equity was to also increase, our estimated values would all be below the actual values and would be undesirable. Sensitivity Analysis Ke 5.50% 7.05% 8.50% 10.00% Growth 0% $11.15 $8.38 $6.73 $5.54 3% $20.35 $12.21 $8.77 $6.73 5% N/A $20.98 $12.08 $8.32

Discounted Free Cash Flows

Under the Free Cash Flows model (appendix D), we expect to see Intel’s equity to more than double. We predict free cash flows into the firm to steadily increase and see this trend continuing into the future. Terminal value was calculated using our estimated free cash flows through 2014 and then dividing that number by the WACC of 5.74%. Taking the book value of equity of

$237,038 and dividing that figure by the number of shares outstanding for Intel we arrived at an expected value of $37.04 per share. Upon looking at the sensitivity analysis, it is not until the WACC reaches 9% with zero growth that Intel’s estimated stock price falls below its current price level.

Sensitivity Analysis WACC 4.50% 5.74% 8.00% 9.50% Growth 0% $48.92 $37.04 $25.05 $20.34 3% $124.80 $66.33 $34.57 $25.79 5% N/A $217.78 $51.49 $33.45

The Residual Income model (appendix D) is an effective way of estimating the price of Intel’s stock. By calculating a stream of residual incomes over the next ten years, we are able to discount all numbers back to the present time. First, we find the book value of equity per share, add in earnings per share and then subtract the dividends per share from that, thus giving us the ending book value of equity (which then gives us the next year’s beginning equity). We are then able to find the “normal income” by multiplying the beginning book value of equity with the cost of equity (Ke). Now we can find the residual income by subtracting earnings per share and the normal income. After that, the present value factor must be calculated for each of the next ten years using the formula: 1/(1+Ke)^t where Ke is cost of equity and (t) is the number of years

discounting. Next we will multiply that year’s residual income with the PV factor to calculate the present value of residual income. The sum of each years PV of residual income gives us a total. Then a terminal value is calculated using the perpetuity formula based on a given growth rate which is a variable in the sensitivity analysis. These residual incomes are discounted back to present time and added up to give us an estimated value share price. We will use an

estimated cost of equity of 7.05% (which was calculated using a five year beta). Using the estimated beta and Ke of 7.05%, Intel’s stock price came to $16.97 with zero growth. The actual current price per share is $23.01. Obviously this estimate is too low due in large part to the high Ke. Plus, this estimated price value of $16.97 doesn’t include growth, which means if Intel wants to grow larger, the price should be even higher. Thus, this shows that using this 7.05% rate, Intel is overvalued. To raise the price back up to its actual price of $23.01, we will perform a sensitivity analysis to try and get a more realistic Ke and growth rate.

Sensitivity Analysis Ke 5.50% 7.05% 8.50% 10.00% Growth 0% $22.31 $16.96 $14.19 $12.50 3% $35.88 $21.38 $15.93 $13.14 5% N/A $31.49 $18.75 $14.00

Looking at the data above, we can see our Ke with its stock price in yellow. We found the share price drops with an increase in Ke; however, the price does not drop with an increase in growth rate unless it was negative which would be a wrong assumption. You can see based on this model that 7.05% makes the company overvalued. Thus, we estimate the market assumes a cost of equity between 5% and 7%. If Intel could lower their cost of equity the share price would rise closer to the current market value.

Abnormal Earnings Growth

Another valuation method done is the abnormal earnings growth method (appendix D). In this model we use the earnings per share and dividends per share in order to forecast valuation of the firm. The first step in the valuation is to calculate the dividend per share invested at the cost of equity. We do this by dividing by the dividend per share of the previous year by the cost of equity. Next, we need to find the cumulative dividend earnings. This is found by adding the earnings per share with the dividend per share at the 7.05% rate. In finding the normal earnings we multiply the earnings per share by one plus the cost of equity. The abnormal earning growth is then calculated by subtracting the cumulative dividend earnings with the normal earnings. After finding the PV factor and the total PV of AEG we then take a look at the terminal value. The terminal value is calculated by dividing AEG by the cost of equity minus the growth. In our case the cost of equity is 7.05% and our growth is zero. Finally in finding the value per share for Intel, we have to add the EPS to the PV of AEG

and add the PV of terminal value and the total present value of AEG. Once those things are added up we divide the number by the cap rate which is Ke.

Looking at the sensitivity analysis we see that our value per share is $17.69, if a growth occurred by 3%, and our cost of equity remained the same or were to grow to 8% we would be above the actual value per share. We begin to fall below the actual value when we have no growth and cost of equity

increases to 9%. Sensitivity Analysis Ke 5.50% 7.05% 8.50% 10.00% Growth 0% $22.28 $17.38 $14.42 $12.25 3% $35.76 $23.07 $17.50 $14.07 5% N/A $36.12 $22.48 $16.50

Conclusion

We were able to come to a number of conclusions after reviewing the previous models used to estimate the share price of Intel.

First, with our estimated cost of equity at 7.05%, we feel that this is too high and a cost of equity at 5.5% with zero growth would be more appropriate to suit Intel. However, if Intel’s growth rate was 3%, our estimated 7.05% cost of equity would be fitting. We were able to draw up this conclusion after using a pure sensitivity analysis in each of the models listed above.

Next, we have come to the conclusion that Intel is either fairly valued of a little overvalued. We are confident our work is accurate, but with a little more accurate information, such as knowing dividends declared in the future, we would be able to come up with a more accurate picture of Intel’s future. We feel we were able to accurately capture Intel’s future prospects, but until those

prospects occur, one can never be completely sure.

To the best of our knowledge, Intel is fairly priced and we do not