stable-periodreinvestment rate and cost of capital that we
estimated earlier:
The terminal value is:
Discountingtheterminalvaluetothepresentandaddingitto
the present value of the cash flows over the high-growth
period yields a value for the operating assets of the firm.
Adding back the firm’s cash and marketable securities
(estimated to be $9,277 million at the end of 2004) and
subtractingthevalueofthedebt($11,243million)yieldsa
value for the equity in the firm:
The final adjustment relates to management options
outstanding.To estimate thevalueof equityper share, we
subtractthevalueofoptionsoutstandingcurrently ($633.53
million)
4 and divide bytheactual(rather thandiluted)number of
shares outstanding (884.68 million).