XII
Detailed Valuation Scenarios
================================================================================ VALUATION SCENARIOS - DISCOUNTED CASH FLOW (DCF) ANALYSIS ================================================================================ 🏆 GREAT COMPOUNDER ADJUSTMENT: GOOG exhibits high ROIC, consistent growth, and stable business characteristics. Applied 10-15% valuation premium through lower discount rates (reflecting lower risk and higher quality). Stock: GOOG Current Price: $330.34 Shares Outstanding: 12.26B (12,264,000,000 shares) Base Year FCF (FY 2024): $79.8B (from financial statements) -------------------------------------------------------------------------------- BEAR CASE (Probability: 25%) Conservative: Below-trend growth, elevated risk premium, modest recession impact ASSUMPTIONS: • FCF Growth Rate (Years 1-10): 3.0% • Discount Rate (WACC): 10.5% • Terminal Growth Rate: 2.5% 10-YEAR FCF PROJECTION: Year FCF ($M) PV Factor PV of FCF ($M) ------------------------------------------------------------ 1 $82,155,890,000 0.9050 $74,349,221,719 2 $84,620,566,700 0.8190 $69,302,894,453 3 $87,159,183,701 0.7412 $64,599,078,088 4 $89,773,959,212 0.6707 $60,214,525,276 5 $92,467,177,988 0.6070 $56,127,566,547 6 $95,241,193,328 0.5493 $52,318,003,207 7 $98,098,429,128 0.4971 $48,767,007,514 8 $101,041,382,002 0.4499 $45,457,029,629 9 $104,072,623,462 0.4071 $42,371,710,876 10 $107,194,802,166 0.3684 $39,495,802,898 ------------------------------------------------------------ Total PV of 10-Year FCF: $553,002,840,207 TERMINAL VALUE: • Year 11 FCF: $109,874,672,220 • Terminal Value: $1,373,433,402,747 • PV of Terminal Value: $506,039,974,625 VALUATION SUMMARY: • Enterprise Value: $1,059.0B • Shares Outstanding: 12.26B • Intrinsic Value per Share: $86.35 • Current Price: $330.34 • Upside/Downside: -73.9% • Margin of Safety: -282.5% -------------------------------------------------------------------------------- BASE CASE (Probability: 50%) Balanced: Sustainable growth trajectory, market-appropriate discount rate, realistic perpetuity assumptions ASSUMPTIONS: • FCF Growth Rate (Years 1-10): 8.0% • Discount Rate (WACC): 9.0% • Terminal Growth Rate: 3.0% 10-YEAR FCF PROJECTION: Year FCF ($M) PV Factor PV of FCF ($M) ------------------------------------------------------------ 1 $86,144,040,000 0.9174 $79,031,229,358 2 $93,035,563,200 0.8417 $78,306,172,208 3 $100,478,408,256 0.7722 $77,587,766,958 4 $108,516,680,916 0.7084 $76,875,952,582 5 $117,198,015,390 0.6499 $76,170,668,614 6 $126,573,856,621 0.5963 $75,471,855,140 7 $136,699,765,151 0.5470 $74,779,452,799 8 $147,635,746,363 0.5019 $74,093,402,774 9 $159,446,606,072 0.4604 $73,413,646,785 10 $172,202,334,557 0.4224 $72,740,127,090 ------------------------------------------------------------ Total PV of 10-Year FCF: $758,470,274,308 TERMINAL VALUE: • Year 11 FCF: $177,368,404,594 • Terminal Value: $2,956,140,076,570 • PV of Terminal Value: $1,248,705,515,041 VALUATION SUMMARY: • Enterprise Value: $2,007.2B • Shares Outstanding: 12.26B • Intrinsic Value per Share: $163.66 • Current Price: $330.34 • Upside/Downside: -50.5% • Margin of Safety: -101.8% -------------------------------------------------------------------------------- BULL CASE (Probability: 25%) Optimistic: Strong execution, market share gains, operating leverage, sustained competitive advantages ASSUMPTIONS: • FCF Growth Rate (Years 1-10): 14.0% • Discount Rate (WACC): 8.0% • Terminal Growth Rate: 3.5% 10-YEAR FCF PROJECTION: Year FCF ($M) PV Factor PV of FCF ($M) ------------------------------------------------------------ 1 $90,929,820,000 0.9259 $84,194,277,778 2 $103,659,994,800 0.8573 $88,871,737,654 3 $118,172,394,072 0.7938 $93,809,056,413 4 $134,716,529,242 0.7350 $99,020,670,658 5 $153,576,843,336 0.6806 $104,521,819,028 6 $175,077,601,403 0.6302 $110,328,586,752 7 $199,588,465,599 0.5835 $116,457,952,682 8 $227,530,850,783 0.5403 $122,927,838,943 9 $259,385,169,893 0.5002 $129,757,163,328 10 $295,699,093,678 0.4632 $136,965,894,624 ------------------------------------------------------------ Total PV of 10-Year FCF: $1,086,854,997,860 TERMINAL VALUE: • Year 11 FCF: $306,048,561,957 • Terminal Value: $6,801,079,154,595 • PV of Terminal Value: $3,150,215,576,357 VALUATION SUMMARY: • Enterprise Value: $4,237.1B • Shares Outstanding: 12.26B • Intrinsic Value per Share: $345.49 • Current Price: $330.34 • Upside/Downside: +4.6% • Margin of Safety: 4.4% -------------------------------------------------------------------------------- ================================================================================ SENSITIVITY ANALYSIS - Intrinsic Value per Share ================================================================================ How intrinsic value changes with different growth and discount rates: Growth → 3% 5% 8% 10% 12% 15% WACC ↓ ------------------------------------------------------------------ 8% $ 126↓ $ 147↓ $ 186↓ $ 218↓ $ 254↓ $ 321 9% $ 106↓ $ 124↓ $ 155↓ $ 181↓ $ 210↓ $ 264↓ 10% $ 92↓ $ 107↓ $ 133↓ $ 154↓ $ 178↓ $ 222↓ 11% $ 81↓ $ 94↓ $ 116↓ $ 134↓ $ 154↓ $ 191↓ 12% $ 73↓ $ 83↓ $ 102↓ $ 118↓ $ 135↓ $ 167↓ Current Price: $330.34 Base FCF: $79,763,000,000M Terminal Growth: 2.5% (constant) Legend: ↑ = 30%+ upside | ↓ = 10%+ downside ================================================================================ ================================================================================ PROBABILITY-WEIGHTED VALUATION ================================================================================ Bear Case (86.35) × 25% = $21.59 Base Case (163.66) × 50% = $81.83 Bull Case (345.49) × 25% = $86.37 ======================================== Weighted Average Intrinsic Value: $189.79 Current Price: $330.34 Upside/Downside: -42.5% Margin of Safety: -74.1% ================================================================================