The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. You don't have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The first is the discount rate and the other is the cash flows. The calculation above is very dependent on two assumptions. NYSE:REX Intrinsic value, October 10th 2019 Important assumptions Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out. Compared to the current share price of US$73.3, the company appears around fair value at the time of writing. The last step is to then divide the equity value by the number of shares outstanding. The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$420m.

We discount the terminal cash flows to today's value at a cost of equity of 8.4%. The Gordon Growth formula is used to calculate Terminal Value at a future annual growth rate equal to the 10-year government bond rate of 2.7%. After calculating the present value of future cash flows in the intial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage.

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