Help and Definitions
ValuePro

1-5-7-10 Rule- the rule that we use in estimating the Excess Return Period (Period of Competitive Advantage). For 'great' companies with great products, large industry barriers to entry, and great marketing channels (like Microsoft, Intel, Coca Cola) we use 10 years. For 'good' companies we use 7 years. For 'decent' companies we use 5 years. For 'boring' companies that are in competitive industries, we use 1 year. This is a subjective measure.

10-year Treasury Bond Yield- cost of capital input on General Input Screen.  Insert yield (in decimal form) of risk-free long-term Treasury Bond (e.g. 5.92 = 5.92%).

About the ValuePro 2002 Program- integrated spreadsheet software program with five screens: two input screens- the General Input Screen and the Custom Input Screen; and three output screens- the Weighted Average Cost of Capital Screen, the General Pro Forma Screen, and the Custom Pro Forma Screen.

Bond Yield Spread to Treasury- cost of capital input on General Input Screen.  Insert estimate of default risk spread of debt of the firm (in decimal form) over the yield on the 10-year Treasury Bond (e.g. 1.0 = 1.0%).

Company Beta- cost of capital input on General Input Screen.  Insert estimate on the firm's beta (numerous sources for beta estimates can be found on Internet web sites like Yahoo Finance or America Online) that you are valuing (e.g. 1.0 =1.0).

Company Ticker- input on General Input Screen.  Insert ticker symbol of the company (e.g. MSFT) that you are valuing.

Current Stock Price- cost of capital input on General Input Screen.  Insert the most recent market stock price per share for the common stock of the firm you are valuing (e.g. 47.75 = $47.75).

Custom Input Screen- the input screen of the ValuePro 2002 Program, on which you can change any one of six cash flow measures and the weighted average cost of capital for any year during the Excess Return Period.

Custom Pro Forma Screen- the output screen of the ValuePro 2002 Program that shows, based on the custom inputs, the calculation of the various cash flow measures over the Excess Return Period, the Total Corporate Value of the firm, the Total Value to Common Equity, and the Intrinsic Stock Value.

Deoverride- allows you to restore values that were automatically calculated by the Program. It can also be used to restore the value on the Custom Input Screen.  Place the cursor on the value to be restored, select the deoverride button, and hit enter.

Depreciation Rate- cash flow input on General Input Screen and Custom Input Screen.  Equal to depreciation/revenues. Insert in decimal form (e.g. 7.2 = 7.2%)

Download Baseline Data- this button on the ValuePro.net online valuation screen saves the baseline inputs used in an online valuation on your computer as a .txt file.  You must decide where to save the file on your computer.  The easiest place to save it is the vp2002 folder on your hard drive.

Equity Risk Premium- input on the General Input Screen.  Is a measure of the return, in excess of that associated with the 10-year Treasury Bond yield, that an investor expects to receive, from a diversified portfolio of stock.  You don't just stumble across this measure on Internet finance sites. As of 2001, we believe that a reasonable number for the stock market risk premium (or equity risk premium) is 3.0% (e.g. .03 = 3.0%) and is consistent with the Goldman Sach's measure of the risk premium.

Excess Return Period- input on the General Input Screen.  It is the period of time that you expect the firm to earn a return on its corporate investment that is greater than its WACC. The ValuePro 2002 Program can accommodate an Excess Return Period of up to 30 years.  We use the 1-5-7-10 Rule for this input.  Insert in whole number form (e.g. 7 = 7 years).

General Input Screen- the initial screen of the ValuePro 2002 Program, in which you insert the initial cash flow and cost of capital inputs. Given the initial inputs, this screen will show Intrinsic Stock Value.

General Pro Forma Screen- the output screen of the ValuePro 2002 Program that shows, based on the general inputs, the calculation of the various cash flow measures over the Excess Return Period, the Total Corporate Value of the firm, the Total Value to Common Equity, and the Intrinsic Stock Value.

Growth Rate- cash flow input on General Input Screen and Custom Input Screen.  Equal to your estimate of the firm's revenue growth rate in percent over the Excess Return Period.  Finance Internet sites like Zack's, First Call, and IBES project revenue growth rates over differing periods. Yahoo Finance and America Online also have growth rates. Insert in decimal form (e.g. 13.0 = 13.0%). Warning: Academic studies have shown that analyst's forecasted growth rates have been upwardly biased.

Investment Rate- cash flow input on General Input Screen and Custom Input Screen.  Equal to investment in property, plant and equipment/revenues.  Insert in decimal form (e.g. 20.6 = 20.6%).

Navigating the ValuePro 2002 Program- Use the ValuePro function on the main tool bar and a pop-up up menu for the five ValuePro screens will appear.  Click on the screen that you wish to go to.

Net Operating Profit Margin- cash flow input on General Input Screen and Custom Input Screen. Equal to net operating profit/revenues.  Insert in decimal form (e.g. 26 = 26.0%).

Open Valuation File- Retrieves inputs used in a previous valuation and brings up that valuation.

Preferred Stock Yield- cost of capital input on General Input Screen.  Insert yield (in decimal form) of preferred stock of the firm (e.g. 8.0 = 8.0%).

Revenues- cash flow input on General Input Screen.  Equal to most recent 12-month trailing revenue of the firm measured in $ millions (e.g. 10687 = $10,687 million).

Save Valuation Data As...- Effectively acts as the save function of the ValuePro 2002 Program.  It will not change the default file that loads when the program is loaded.  The files created are .BDT files and require very little disk space.  Always select 'Input Cells' under Put Version Options or your data may be lost.

Saving Data- Use the Save Valuation Data As command under the File drop down menu to save valuations.

Shares Outstanding- input on General Input Screen.  Insert the most recent publicly-available number of shares outstanding (Yahoo Finance and America Online have this amount).  Adjustments to shares outstanding generally are made when a company has granted a large amount of stock options to its employees, to account for the dilutive aspects of options.

Short-Term Assets- the most recent current asset shown on the balance sheet of the firm. Should be updated quarterly.

Short-Term Liabilities- the most recent current liabilities shown on the balance sheet of the firm. Should be updated quarterly.

Tax Rate- cash flow input on General Input Screen and Custom Input Screen.  Equal to provision for income taxes/operating income before provision for taxes. Insert in decimal form (e.g. 30.1 = 30.1%).

Value of Debt Outstanding- input on General Input Screen.  Insert the most recent amount of debt outstanding in $ millions (e.g. 4931 = $4,931 million), which is most easily found on the firm's balance sheet associated with its annual report.

Value of Preferred Stock Outstanding- input on General Input Screen.  Insert the most recent amount of preferred stock outstanding in $ millions (e.g. 358 = $358 million), which is most easily found on the firm's balance sheet associated with its annual report.

Weighted Average Cost of Capital (WACC) Screen- output screen of the ValuePro 2002 Program that shows, based on the general inputs, the calculation of the after-tax weighted average cost of capital, and the market capitalization of the company that you are valuing.

Working Capital (% of Revenue) - cash flow input on General Input Screen and Custom Input Screen. Equal to the change in working capital/change in revenues.  Working Capital is equal to [(Accounts Receivable + Inventory) Accounts Payable]. Insert change in working capital (either positive or negative) in decimal form (e.g. -1.2 = -1.2%).