Editing Oracle Corporation
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== DCF Valuation == | == DCF Valuation == | ||
Our $131.43 price target represents our DCF valuation on Oracle over the next 5 years. A discount rate of 7.46% and a perpetual growth rate of 3% were used in order to calculate discounted cash flows and terminal value<ref name=":0" />. The discount rate was calculated using the Weighted Average Cost of Capital (WACC) formula. The cost of equity was calculated using the Capital Asset Pricing Model (CAPM). A beta of 0.85, a market risk premium of 5%<ref>Damodaran. (2023). Country Default Spread and Risk Premiums. [https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html]</ref> and a risk-free rate of 4.16% were used in the CAPM calculation. This target price shows a potential upside of around 16.25% when compared to the current market price. DCF is an assumption-based model and the accuracy of those assumptions can significantly impact the valuation results. The assumptions used are included in the following table: | Our $131.43 price target represents our DCF valuation on Oracle over the next 5 years. A discount rate of 7.46% and a perpetual growth rate of 3% were used in order to calculate discounted cash flows and terminal value<ref name=":0" />. The discount rate was calculated using the Weighted Average Cost of Capital (WACC) formula. The cost of equity was calculated using the Capital Asset Pricing Model (CAPM). A beta of 0.85, a market risk premium of 5%<ref>Damodaran. (2023). ''Country Default Spread and Risk Premiums. [https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html]''</ref> and a risk-free rate of 4.16% were used in the CAPM calculation. This target price shows a potential upside of around 16.25% when compared to the current market price. DCF is an assumption-based model and the accuracy of those assumptions can significantly impact the valuation results. The assumptions used are included in the following table: | ||
== Sensitivity Analysis == | == Sensitivity Analysis == |