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Tabcorp Holding Ltd TAH Opinion Data as 30June2004 Recommendation Strong Buy Current share price 1424 Valuation 1843 Market capitalisation 5920 m Intrinsic Share Value The Tabcorp Holding TAH share price was calculated using a financial calculator - Valueproxls It uses a two-stage discounted cash flow model to determine the intrinsic share price In the first stage of the model the company is assumed to grow at a fixed rate The growth rate is assumed by using historical information about the company obtained from its annual reports 1995 - 2004 In addition to growth rate assumptions were made on the profit margin tax rate investment rate and depreciation rate for the company These values then contributed to the first stage calculation of the cash flow during periods 1 -8 In addition the cash flow for a year is calculated as profit after tax - net investment - change in working capital In the second stage of the model the company is assumed to have reached maturity thus has 0 growth going forward Therefore profit after tax remains constant for perpetuity and there is no net investment or change in working capital The future cash flows are calculated by using the perpetuity formula on the profit after tax figure All cash flows calculated during the two stages are then discounted to present value to give the NPV of the company Dividing the NPV figure by the number of shareholders provides the intrinsic share price The model uses a Weighted Average Cost of Capital calculated based on the formula WACC Wdrf Webrm - rf where Wd is the weighting of debt We is the weighting of equity rf is the risk free rate b is the company beta and rm is the return of the market portfolio Assumptions The following assumptions have been made to calculate the intrinsic share value of TAH All assumptions are
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