Valuation · Methodology I of III
Discounted Cash Flow Valuation
5-year explicit projection of unlevered free cash flow, Gordon-growth terminal value, discounted at WACC. Implies $91.85 / share equity value vs $95 offer.
Implied EV
$62.1B
Implied Equity
$72.1B
+ $10B net cash
Implied Share Price
$91.85
vs $95 offer
WACC
8.38%
Perp growth 2.5%
Unlevered Free Cash Flow Build
$ in billions| Year | Revenue | EBITDA | UFCF / TV |
|---|---|---|---|
| FY23E | $8.8B | $3.2B | $2.1B |
| FY24E | $10.4B | $3.9B | $2.6B |
| FY25E | $11.8B | $4.5B | $3.0B |
| FY26E | $13.0B | $5.1B | $3.5B |
| FY27E | $14.1B | $5.6B | $3.9B |
| TV | — | — | $56.0B |
WACC Build
Risk-free rate (10Y UST)4.30%
Equity risk premium (Damodaran)5.50%
Levered beta (ATVI 5Y)0.95
Cost of equity (CAPM)9.53%
Pre-tax cost of debt4.80%
Tax rate21.0%
After-tax cost of debt3.79%
Target capital structure (D/V)20%
WACC8.38%
Sensitivity — Implied Share Price
Rows: WACC · Cols: Perpetuity growth| WACC ↓ / g → | 2.0% | 2.5% | 3.0% | 3.5% | 4.0% |
|---|---|---|---|---|---|
| 7.50% | $92.15 | $98.91 | $107.18 | $117.51 | $130.80 |
| 8.00% | $85.23 | $90.76 | $97.40 | $105.52 | $115.66 |
| 8.38% | $80.70 | $85.50 | $91.19 | $98.05 | $106.47 |
| 8.70% | $77.29 | $81.57 | $86.60 | $92.61 | $99.89 |
| 9.20% | $72.56 | $76.18 | $80.39 | $85.33 | $91.23 |
Cells in gold bracket the $95 offer price — implies the deal is fairly valued at the central case (WACC 8.38%, g 2.5–3.0%).
Football Field (preview)
$95 offer sits centrally vs DCF and precedent transaction ranges.