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VALUATION SCENARIOS - DISCOUNTED CASH FLOW (DCF) ANALYSIS
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📊 DYNAMIC GROWTH RATE CALCULATION FOR GE
━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

Historical Data Inputs:
  • Revenue CAGR 13yr: -8.7%
  • EPS CAGR 13yr: -2.4%
  • Quality boost: ROIC 19.4% (>15%)

Weighted Historical Growth: -5.6%
Industry: Aerospace \u0026 Defense (Industrials)
Industry Growth Modifier: +0.0%
Quality Adjustments: +1.0%

Growth Rates (10-year projection):
  🔻 Bear Case: 1.0% (conservative, recession-resistant)
  ⚖️  Base Case: 3.0% (sustainable, achievable)
  🔺 Bull Case: 5.0% (optimistic, strong execution)

Growth Rate Bounds:
  • Industry floor: 1.0%
  • Industry ceiling: 10.0%


Stock: GE
Current Price: $301.75
Shares Outstanding: 1.07B (1,073,290,505 shares)

Base Year FCF (FY 2024): $20.9B (normalized from historical median - current year anomalous: FCF dropped to 21.3% of 3-year average)

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BEAR CASE (Probability: 25%)
Conservative: Below-trend growth, elevated risk premium, modest recession impact

📊 CASH FLOW NOTE: Using normalized historical FCF ($20.9B, median of prior 3-5 years) instead of current year FCF ($4.2B) which appears anomalous. Current year: FCF dropped to 21.3% of 3-year average.

ASSUMPTIONS:
  • FCF Growth Rate (Years 1-10): 1.0%
  • Discount Rate (WACC): 12.0%
  • Terminal Growth Rate: 2.0%

10-YEAR FCF PROJECTION:
Year     FCF ($M)        PV Factor    PV of FCF ($M) 
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1        $21,140,310,000      0.8929 $18,875,276,786
2        $21,351,713,100      0.7972 $17,021,454,959
3        $21,565,230,231      0.7118 $15,349,704,918
4        $21,780,882,533      0.6355 $13,842,144,614
5        $21,998,691,359      0.5674 $12,482,648,268
6        $22,218,678,272      0.5066 $11,256,673,884
7        $22,440,865,055      0.4523 $10,151,107,699
8        $22,665,273,706      0.4039 $9,154,123,907
9        $22,891,926,443      0.3606 $8,255,058,166
10       $23,120,845,707      0.3220 $7,444,293,525
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Total PV of 10-Year FCF:            $123,832,486,725

TERMINAL VALUE:
  • Year 11 FCF: $23,583,262,621
  • Terminal Value: $235,832,626,211
  • PV of Terminal Value: $75,931,793,955

VALUATION SUMMARY:
  • Enterprise Value: $199.8B
  • Shares Outstanding: 1.07B
  • Intrinsic Value per Share: $186.12
  • Current Price: $301.75
  • Upside/Downside: -38.3%
  • Margin of Safety: -62.1%
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BASE CASE (Probability: 50%)
Balanced: Sustainable growth trajectory, market-appropriate discount rate, realistic perpetuity assumptions

📊 CASH FLOW NOTE: Using normalized historical FCF ($20.9B, median of prior 3-5 years) instead of current year FCF ($4.2B) which appears anomalous. Current year: FCF dropped to 21.3% of 3-year average.

ASSUMPTIONS:
  • FCF Growth Rate (Years 1-10): 3.0%
  • Discount Rate (WACC): 10.0%
  • Terminal Growth Rate: 2.5%

10-YEAR FCF PROJECTION:
Year     FCF ($M)        PV Factor    PV of FCF ($M) 
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1        $21,558,930,000      0.9091 $19,599,027,273
2        $22,205,697,900      0.8264 $18,351,816,446
3        $22,871,868,837      0.7513 $17,183,973,582
4        $23,558,024,902      0.6830 $16,090,447,990
5        $24,264,765,649      0.6209 $15,066,510,391
6        $24,992,708,619      0.5645 $14,107,732,457
7        $25,742,489,877      0.5132 $13,209,967,664
8        $26,514,764,574      0.4665 $12,369,333,358
9        $27,310,207,511      0.4241 $11,582,193,963
10       $28,129,513,736      0.3855 $10,845,145,256
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Total PV of 10-Year FCF:            $148,406,148,378

TERMINAL VALUE:
  • Year 11 FCF: $28,832,751,579
  • Terminal Value: $384,436,687,726
  • PV of Terminal Value: $148,216,985,163

VALUATION SUMMARY:
  • Enterprise Value: $296.6B
  • Shares Outstanding: 1.07B
  • Intrinsic Value per Share: $276.37
  • Current Price: $301.75
  • Upside/Downside: -8.4%
  • Margin of Safety: -9.2%
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BULL CASE (Probability: 25%)
Optimistic: Strong execution, market share gains, operating leverage, sustained competitive advantages

📊 CASH FLOW NOTE: Using normalized historical FCF ($20.9B, median of prior 3-5 years) instead of current year FCF ($4.2B) which appears anomalous. Current year: FCF dropped to 21.3% of 3-year average.

ASSUMPTIONS:
  • FCF Growth Rate (Years 1-10): 5.0%
  • Discount Rate (WACC): 9.0%
  • Terminal Growth Rate: 3.0%

10-YEAR FCF PROJECTION:
Year     FCF ($M)        PV Factor    PV of FCF ($M) 
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1        $21,977,550,000      0.9174 $20,162,889,908
2        $23,076,427,500      0.8417 $19,422,967,343
3        $24,230,248,875      0.7722 $18,710,197,899
4        $25,441,761,319      0.7084 $18,023,585,132
5        $26,713,849,385      0.6499 $17,362,169,164
6        $28,049,541,854      0.5963 $16,725,025,341
7        $29,452,018,947      0.5470 $16,111,262,944
8        $30,924,619,894      0.5019 $15,520,023,936
9        $32,470,850,889      0.4604 $14,950,481,774
10       $34,094,393,433      0.4224 $14,401,840,241
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Total PV of 10-Year FCF:            $171,390,443,682

TERMINAL VALUE:
  • Year 11 FCF: $35,117,225,236
  • Terminal Value: $585,287,087,268
  • PV of Terminal Value: $247,231,590,798

VALUATION SUMMARY:
  • Enterprise Value: $418.6B
  • Shares Outstanding: 1.07B
  • Intrinsic Value per Share: $390.04
  • Current Price: $301.75
  • Upside/Downside: +29.3%
  • Margin of Safety: 22.6%
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SENSITIVITY ANALYSIS - Intrinsic Value per Share
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How intrinsic value changes with different growth and discount rates:

Growth →           3%          5%          8%         10%         12%         15%   
WACC ↓      ------------------------------------------------------------------
   8%    $   378   $   442↑  $   558↑  $   653↑  $   762↑  $   961↑ 
   9%    $   319   $   371   $   466↑  $   542↑  $   631↑  $   790↑ 
  10%    $   276   $   320   $   398↑  $   462↑  $   535↑  $   667↑ 
  11%    $   244↓  $   280   $   347   $   400↑  $   462↑  $   573↑ 
  12%    $   218↓  $   249↓  $   307   $   353   $   405↑  $   500↑ 

Current Price: $301.75
Base FCF: $20,931,000,000M
Terminal Growth: 2.5% (constant)

Legend: ↑ = 30%+ upside  |  ↓ = 10%+ downside
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PROBABILITY-WEIGHTED VALUATION
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Bear Case (186.12) × 25%  = $46.53
Base Case (276.37) × 50%  = $138.19
Bull Case (390.04) × 25%  = $97.51

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Weighted Average Intrinsic Value: $282.23
Current Price: $301.75
Upside/Downside: -6.5%
Margin of Safety: -6.9%
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