Discounted Cash Flow (DCF) Analysis Unlevered

Merck & Co., Inc. (MRK)

$106.93

+2.13 (+2.03%)

All numbers are in Millions, Currency in USD

Stock DCF: 188.55 | 106.93 | undervalue

Operating Data

Year A/P	2018 Actual	2019 Actual	2020 Actual	2021 Actual	2022 Actual	2023 Projected	2024 Projected	2025 Projected	2026 Projected	2027 Projected
Revenue	42,294	46,840	47,994	48,704	59,283	64,679.63	70,567.52	76,991.39	84,000.04	91,646.69
Revenue (%)
EBITDA	14,019	16,075	13,232	18,590	16,437	20,817.95	22,713.04	24,780.65	27,036.47	29,497.64
EBITDA (%)
EBIT	9,500	12,423	9,607	15,376	12,528	15,743.53	17,176.69	18,740.31	20,446.27	22,307.53
EBIT (%)
Depreciation	4,519	3,652	3,625	3,214	3,909	5,074.42	5,536.35	6,040.34	6,590.20	7,190.11
Depreciation (%)

Balance Sheet Data

Year A/P	2018 Actual	2019 Actual	2020 Actual	2021 Actual	2022 Actual	2023 Projected	2024 Projected	2025 Projected	2026 Projected	2027 Projected
Total Cash	8,864	10,450	8,847	8,096	13,192	13,010.57	14,194.95	15,487.13	16,896.95	18,435.11
Total Cash (%)
Account Receivables	7,071	6,778	7,851	9,230	9,450	10,664.28	11,635.06	12,694.22	13,849.80	15,110.56
Account Receivables (%)
Inventories	5,440	5,978	6,310	5,953	5,911	7,886.52	8,604.45	9,387.72	10,242.30	11,174.67
Inventories (%)
Accounts Payable	3,318	3,738	4,594	4,609	4,264	5,439.99	5,935.21	6,475.50	7,064.97	7,708.11
Accounts Payable (%)
Capital Expenditure	-2,615	-3,473	-4,684	-4,448	-4,388	-5,160.34	-5,630.10	-6,142.61	-6,701.79	-7,311.86
Capital Expenditure (%)

Weighted Average Cost Of Capital

Share price	$ 106.93
Beta	0.353
Diluted Shares Outstanding	2,542
Cost of Debt
Tax Rate	11.71
After-tax Cost of Debt	4.41%
Risk-Free Rate
Market Risk Premium
Cost of Equity	5.192
Total Debt	30,691
Total Equity	271,816.06
Total Capital	302,507.06
Debt Weighting	10.15
Equity Weighting	89.85
Wacc

Build Up Free Cash

Year A/P	2018 Actual	2019 Actual	2020 Actual	2021 Actual	2022 Actual	2023 Projected	2024 Projected	2025 Projected	2026 Projected	2027 Projected
Revenue	42,294	46,840	47,994	48,704	59,283	64,679.63	70,567.52	76,991.39	84,000.04	91,646.69
EBITDA	14,019	16,075	13,232	18,590	16,437	20,817.95	22,713.04	24,780.65	27,036.47	29,497.64
EBIT	9,500	12,423	9,607	15,376	12,528	15,743.53	17,176.69	18,740.31	20,446.27	22,307.53
Tax Rate	28.51%	14.14%	19.61%	5.98%	11.71%	15.99%	15.99%	15.99%	15.99%	15.99%
EBIAT	6,791.17	10,666.40	7,722.97	14,456.48	11,061.42	13,226.09	14,430.09	15,743.68	17,176.85	18,740.49
Depreciation	4,519	3,652	3,625	3,214	3,909	5,074.42	5,536.35	6,040.34	6,590.20	7,190.11
Accounts Receivable	-	293	-1,073	-1,379	-220	-1,214.28	-970.79	-1,059.16	-1,155.58	-1,260.77
Inventories	-	-538	-332	357	42	-1,975.52	-717.92	-783.28	-854.58	-932.37
Accounts Payable	-	420	856	15	-345	1,175.99	495.21	540.29	589.47	643.14
Capital Expenditure	-2,615	-3,473	-4,684	-4,448	-4,388	-5,160.34	-5,630.10	-6,142.61	-6,701.79	-7,311.86
UFCF	8,695.17	11,020.40	6,114.97	12,215.48	10,059.42	11,126.37	13,142.84	14,339.26	15,644.58	17,068.73
WACC
PV UFCF						10,585.45	11,896.01	12,347.94	12,817.04	13,303.97
SUM PV UFCF										60,950.41

Terminal Value

Growth in perpetuity method:
Long-term growth rate
WACC (%)	5.11
Free cash flow (t + 1)	17,410.11
Terminal Value	559,810.58
Present Value of Terminal Value	436,335.88

Intrinsic Value

Enterprise Value	497,286.29
Net Debt	17,997
Equity Value	479,289.29
Shares Outstanding	2,542
Equity Value Per Share	188.55