• Number of outstanding shares: 1,890,000,000 (as of 30 June 2022)
• Cash flow statement data for the years ending 30 June 2020, 2021, and 2022
• Income statement data for the years ending 30 June 2020, 2021, and 2022
• WACC = 2.6428%
• ASX code: QAN
• 
  

Calculating Free Cash Flow to the Firm (FCFF) FCFF = Operating Cash Flow - Capital Expenditures + Interest Expense * (1 - Tax Rate)

FCFF for 2020: = 1,083,000,000 - (-1,549,000,000) + (-228,000,000) * (1 - 0.28) = 1,583,520,000

FCFF for 2021: = -386,000,000 - (-747,000,000) + (-256,000,000) * (1 - 0.27) = -545,790,000

FCFF for 2022: = 2,670,000,000 - (-906,000,000) + (-252,000,000) * (1 - 0.25) = 3,163,500,000

Calculating Present Value of FCFF using WACC PV = FCF / (1 + WACC)^n

PV of FCFF for 2020: = 1,583,520,000 / (1 + 0.026428)^1 = 1,544,775,738

PV of FCFF for 2021: = -545,790,000 / (1 + 0.026428)^2 = -504,436,566

PV of FCFF for 2022: = 3,163,500,000 / (1 + 0.026428)^3 = 2,873,042,753

Summing the present value of each year's FCFF: Total intrinsic value = 1,544,775,738 - 504,436,566 + 2,873,042,753 = 3,913,381,925

Dividing the total intrinsic value by the number of outstanding shares: Intrinsic value per share = 3,913,381,925 / 1,890,000,000 = 2.07

Therefore, the intrinsic value per share of Qantas based on the WACC calculation is 2.07. To compare it with the current market price, we need the current market price of Qantas. If the market price is higher than the intrinsic value per share, the stock may be overvalued, and if it is lower, the stock may be undervalued.

Explanation:

In this case, the WACC has been calculated to be 2.6428%. This means that Qantas Airways Ltd. has a cost of capital of 2.6428% for every dollar of financing it uses, taking into account the proportion of debt and equity financing used.

The WACC calculation is then used to determine the intrinsic value per share of Qantas Airways Ltd. The calculation takes into account the Free Cash Flow to the Firm (FCFF) for each year and discounts it back to its present value using the WACC. The sum of the present value of each year's FCFF is then divided by the number of outstanding shares to arrive at the intrinsic value per share.

In this case, the intrinsic value per share is calculated to be 2.07. If the current market price of Qantas Airways Ltd. is higher than 2.07, the stock may be overvalued, and if it is lower, the stock may be undervalued 1:

Is this correct? why does it use the t=1 ,2,3 to discount the fcff for yr 2020,2021 and 2022 respectively? if we do like this and add the discounted fcff to get the intrinsic value , how can we get the intrinsic value at present? disocunting fcff for 2021 gives the value for year 2020.