Disney (DIS) - Intrinsic Valuation via Pro Forma & Discounted Free Cash Flow

What this project is

This is a corporate valuation built end-to-end in Excel for my Financial Modeling final at UNC Charlotte. Starting from Disney’s FY2025 annual report, I estimated the company’s cost of capital, built forward assumptions from historical data, projected full pro forma financial statements five years out, derived free cash flow, and discounted it back to a present intrinsic value per share.

The brief was to pick an S&P 500 company and run the full pro forma / FCF valuation process. I chose Disney because it has a mix of mature cash-generating businesses and higher-variance growth questions across entertainment, sports, streaming, and experiences.

Methodology

Cost of capital

The model uses an 8.86% WACC. Cost of equity came from CAPM at 9.57%, using a 1.49 equity beta from Yahoo Finance, a 4.02% 10-year Treasury risk-free rate, and a 3.73% market risk premium from Damodaran / NYU Stern.

For debt, I used a 6.4% representative yield from a Disney corporate bond with roughly 10 years to maturity. Capital weights came from market values: 81.7% equity and 18.3% debt, based on approximately $187.8B of equity market capitalization and $42.0B of debt.

One judgment call mattered: Disney’s FY2025 effective tax rate was an abnormal -11.9% because of a one-time tax benefit. Using that figure would have distorted the model, so I normalized the tax rate to 24% as a more defensible long-run corporate rate.

Assumptions from history

The pro forma engine is built from 3 to 6 years of 10-K data, with most assumptions expressed as ratios to sales so they scale cleanly:

• Sales growth: 7.63%, based on the six-year historical average.
• COGS: 64.4% of sales.
• SG&A: 17.3% of sales.
• Depreciation: 7.0% of gross PPE.
• CAPEX: 6.7% of sales.
• Current assets: 20.5% of sales.
• Current liabilities: 29.9% of sales.

Disney also runs with negative net working capital, around -9% of sales. That makes sense operationally: customers often pay ahead through theme-park bookings, streaming subscriptions, and other deferred-revenue-heavy products. The model preserves that relationship rather than forcing net working capital positive.

Pro forma statements and free cash flow

I projected the income statement, balance sheet, and free cash flow five years forward. Cash acts as the balancing plug item so the balance sheet ties each year.

Free cash flow follows the standard unlevered formula:

FCF = EBIT(1 - tax rate) + depreciation - CAPEX - change in net working capital

Valuation

The model discounts years 1 through 5 of free cash flow at the 8.86% WACC, producing a present value of about $42.3B. The terminal value uses a 3.0% perpetual growth rate, with a discounted present value of about $146.0B.

Together, that implies enterprise value of approximately $196.5B. After subtracting $42.0B of debt and adding $5.7B of cash plus $8.1B of investments, equity value lands at approximately $168.2B. Dividing by 1,799M shares outstanding produces an intrinsic value estimate of $93.51 per share.

What I would refine next

• Add a sensitivity table for WACC versus terminal growth, since terminal value is roughly 74% of enterprise value.
• Move from consolidated ratios to segment-level modeling for Parks, Entertainment, and Sports.
• Add a bull / base / bear scenario layer around the sales-growth assumption.

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