Technical appendix · Reproducing the expectations exercise

All monetary model inputs below are USD billions; shares are millions. Let R0 = 4.641848, N = 264.763418 and r = 0.12. For each scenario, choose the year-five revenue R5, terminal owner margin m5 and exit multiple k from chapter 6. For years t = 1 to 5:

Revenue_t = R0 × (R5/R0)^(t/5)
Margin_t = m5 × t/5
Owner cash_t = Revenue_t × Margin_t
Terminal equity_5 = R5 × m5 × k
Present equity = sum(Owner cash_t / (1+r)^t) + Terminal equity_5 / (1+r)^5
Present value per basic share = Present equity × 1,000 / N.

The final annual owner cash and terminal value are both included: the terminal represents future earning capacity after the modeled distribution. There is no additional accumulation of already distributed cash in that value. The exit multiple is a judgment about the period beyond year five. The 12% return is an assumption, with 8% and 16% shown as sensitivities, rather than a sourced Treasury rate or a recommended return for every investor.

The three input sets are Stress (R5 = 6, m5 = 12%, k = 15), Execution (10, 22%, 22) and Platform (16, 28%, 28). Their unrounded per-basic-share outputs are $28.1894, $117.1521 and $293.2500. The book’s numerical examples can therefore be reproduced without access to a proprietary forecast.

This is a bounded equity-cash exercise. Owner margins must accommodate economic compensation, necessary cash investment, interest, taxes and resources retained for obligations and liquidity. The basic-share denominator assumes future compensation is economically funded or offset; existing dilutive instruments require additional analysis. The model credits no separately appraised excess cash or investment portfolio. A detailed net-debt adjustment should not be bolted onto an equity-cash model without checking which obligations are already reflected.