1. Company Profile and Financial Information公司简介和财务信息
微软公司是世界领先的科技公司，它致力于提供最好的商业软件和服务。微软公司涉及的主要领域是Windows操作系统和相关软件、Xbox游戏设备和视频游戏、智能手机、服务器产品和企业服务。根据美国专利商标局的最新数据，微软公司被评为世界第五大创新型公司。（今日美国，2015）
2014年，在新CEO Satya Nadella的领导下，微软公司取得了很大的进步，股价同比增长24%，市盈率目前在18左右，未来还有进一步提升的潜力。根据微软公司的财务报告，Windows和Office产品仍然是主要的收入来源。然而，与去年相比，快速增长地区的收入翻了一番。事实上，微软公司已经在这些领域进行了大量投资，即商业云服务、Office365和Azure，后者具有与市场领导者竞争的能力。尽管新的投资仍需要时间来产生占总收入更大比例的收入，但微软公司有机会从中获益。预计公司股票价格将上涨10%以上，股息率高达2.7%，微软公司将成为投资者的良好选择。
Microsoft Corporation is a world-leading company in the technology industry, aiming to provide the best business software and services. The main areas that Microsoft Corporation involves are Windows operating system and related software, Xbox gaming devices and video games, smartphones, server products and enterprise services. Microsoft Corporation is ranked the fifth most innovative companies in the world according to the latest data of United States Patent and Trademark Office.(USA TODAY, 2015)
In year 2014, under the direction of the new CEO, Satya Nadella, Microsoft Corporation has achieved great improvement, the share price of which has increased 24% over the year and the P/E ratio is currently around 18, and has the potential for further improvement in the future. According to the financial report of Microsoft Corporation, Windows and Office products are still the main source of revenue. However, the revenue generated by fast-growing areas has doubled compared with last year’s figure. In fact, Microsoft Corporation has invested significantly in these segments, namely the commercial cloud services, Office 365 and Azure, the latter having the ability to compete with the market leaders. Although it still needs time for the new investments to generate revenue accounting for more percentage of the total revenue, Microsoft Corporation has the opportunity to gain from these. It is anticipated that the stock price of the company could well increase for more than 10%, along with the high dividend rate of 2.7%, making Microsoft Corporation a good choice for investors.
From the yahoo finance, we get the data of total liabilities= $82,600,000 and total assets=$172,384,000. Thus the debt ratio=total liabilities/total assets=(82,600,000/172,384,000)*100%=47.92 %. And this is less than 50%.
It can be seen from the debt ratio that the majority of the capital of Microsoft Corporation isfinanced through equity. The interest expenses incurred by debt financing tend to erode the profit of the company, thus reducing the amount of capital that could be used for further investment and hence the flexibility of the company’s operation. Since the debt ratio is less than 50%, the interest expenses will not be a main threat to the flexibility of the company, so that the company is more flexible than the companies with higher debt ratio.
Contents
1. Company Profile and Financial Information 3
2. Cost of Equity and Cost of Debt 5
3. Firm Valuation 8
4. Investment Appraisal 11
Conclusion 15
Reference 16
Appendix 17
Table
Table 1 Cash Flow of the Project 6
Figure
Figure 1The Sensitivity of the Value per Share to the FCF Growth 6
Appendix
Appendix A Financial Statement of Microsoft Corporation 8
Appendix B Cost of equity using the Gordon Growth Model 10
Appendix C Calculation of Cost of Equity and Tax Rate 10
Appendix D Calculation of WACC 10
Appendix ECalculation of Free Cash Flow 11
Appendix FCalculation of Value per Share 11
Appendix G Investment Appraisal 12
Appendix HCalculation of Break-even Point 12
Conclusion
This report analyses the financial status of Microsoft Corporation, and calculate important parameters of the company, such as the capital structure and enterprise value, by using the financial model (GGM and WACC, for instance), according to the financial data of Microsoft Corporation.
And the report finds out that the company performed well in 2014 and it is expected to continue with the performance in 2015. The debt financing accounts for 5.86% of the total capital and 94.14% of the capital is financed
