Calculate the value of Chipotle Mexican Grill (CMG) equity based on a discounted cash flow model
Estimate free cash flows based on the latest financial reports available
Determine if Chipotle is in steady state and growing at constant rate – if this is the case, use a growing perpetuity formula to estimate the Enterprise Value; if the company is not in steady state, build a proforma income statement for the next several years and calculate Terminal Value at the point of time when you think the company will start growing at a steady state.
Use 5.47% for the WACC
apply current long-term risk-free rate as your growth rate;
Estimate the value of equity per share
Discuss/demonstrate how sensitive your calculated value is to different assumptions
a. Select at least two variables and provide sensitivity analysis (in graphs/tables)
Compare your calculated value to current market price (per share) and discuss any variance
What growth rate will make your calculation equal to current market value? Does it make sense?
Conduct relative valuation of Chipotle (market multiples)
Apply at least two different ratios to calculate the company’s enterprise value based on a sample of peer companies
Determine value per share
Compare to DCF estimates and current market prices; provides comments on any
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