Estimating Share Value Using the DCF Model Following are forecasted sales, NOPAT, and NOA for Colgate-Palmolive Company for 2019 through 2022. Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places. a. Forecast the terminal period values assuming the following terminal period growth rate. Assumption Terminal period growth rate 1% Reported Forecast Horizon Period Terminal $ millions 2018 2019 2020 2021 2022 Period Sales $4,663 $4,803 $4,947 $5,096 $5,249 Answer NOPAT 821 845 871 897 924 Answer NOA 1,751 1,804 1,858 1,913 1,971 Answer b. Estimate the value of a share of Colgate-Palmolive common stock using the discounted cash flow (DCF) model using the following assumptions and the information above. Assumptions Discount rate (WACC) 5.70% Common shares outstanding 259.0 million Net nonoperating obligations (NNO) $1,692 million Noncontrolling interest (NCI) $90 million Reported Forecast Horizon Terminal ($ millions) 2018 2019 2020 2021 2022 Period Increase in NOA Answer Answer Answer Answer Answer FCFF (NOPAT - Increase in NOA) Answer Answer Answer Answer Answer Present value of horizon FCFF Answer Answer Answer Answer Cum. present value of horizon FCFF Answer Present value of terminal FCFF Answer Total firm value Answer Less (plus) NNO Answer Less NCI Answer Firm equity value Answer Shares outstanding (millions) Answer Stock price per share Answer c. Colgate-Palmolive’s stock closed at $66.70 on February 21, 2019, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? Answer d. The forecasts you completed assumed a terminal growth rate of 1%. What if the terminal rate had been 2%. What would your estimated stock price have been? Value Answer e. What would WACC have to be to warrant the actual stock price on February 21, 2019? WACC Answer
Estimating Share Value Using the DCF Model Following are forecasted sales, NOPAT, and NOA for Colgate-Palmolive Company for 2019 through 2022. Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places. a. Forecast the terminal period values assuming the following terminal period growth rate. Assumption Terminal period growth rate 1% Reported Forecast Horizon Period Terminal $ millions 2018 2019 2020 2021 2022 Period Sales $4,663 $4,803 $4,947 $5,096 $5,249 Answer NOPAT 821 845 871 897 924 Answer NOA 1,751 1,804 1,858 1,913 1,971 Answer b. Estimate the value of a share of Colgate-Palmolive common stock using the discounted cash flow (DCF) model using the following assumptions and the information above. Assumptions Discount rate (WACC) 5.70% Common shares outstanding 259.0 million Net nonoperating obligations (NNO) $1,692 million Noncontrolling interest (NCI) $90 million Reported Forecast Horizon Terminal ($ millions) 2018 2019 2020 2021 2022 Period Increase in NOA Answer Answer Answer Answer Answer FCFF (NOPAT - Increase in NOA) Answer Answer Answer Answer Answer Present value of horizon FCFF Answer Answer Answer Answer Cum. present value of horizon FCFF Answer Present value of terminal FCFF Answer Total firm value Answer Less (plus) NNO Answer Less NCI Answer Firm equity value Answer Shares outstanding (millions) Answer Stock price per share Answer c. Colgate-Palmolive’s stock closed at $66.70 on February 21, 2019, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? Answer d. The forecasts you completed assumed a terminal growth rate of 1%. What if the terminal rate had been 2%. What would your estimated stock price have been? Value Answer e. What would WACC have to be to warrant the actual stock price on February 21, 2019? WACC Answer
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Estimating Share Value Using the DCF Model
Following are forecasted sales,
Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places.
a.
| Assumption | |
|---|---|
| Terminal period growth rate | 1% |
| Reported | Forecast Horizon Period | Terminal | |||||
|---|---|---|---|---|---|---|---|
| $ millions | 2018 | 2019 | 2020 | 2021 | 2022 | Period | |
| Sales | $4,663 | $4,803 | $4,947 | $5,096 | $5,249 | Answer
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| NOPAT | 821 | 845 | 871 | 897 | 924 | Answer
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| NOA | 1,751 | 1,804 | 1,858 | 1,913 | 1,971 | Answer
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b. Estimate the value of a share of Colgate-Palmolive common stock using the discounted cash flow (DCF) model using the following assumptions and the information above.
| Assumptions | ||
|---|---|---|
| Discount rate (WACC) | 5.70% | |
| Common shares outstanding | 259.0 | million |
| Net nonoperating obligations (NNO) | $1,692 | million |
| Noncontrolling interest (NCI) | $90 | million |
| Reported | Forecast Horizon | Terminal | |||||
|---|---|---|---|---|---|---|---|
| ($ millions) | 2018 | 2019 | 2020 | 2021 | 2022 | Period | |
| Increase in NOA | Answer
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| FCFF (NOPAT - Increase in NOA) | Answer
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| Present value of horizon FCFF | Answer
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| Cum. present value of horizon FCFF | Answer
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| Less (plus) NNO | Answer
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c. Colgate-Palmolive’s stock closed at $66.70 on February 21, 2019, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price?
Answer
d. The forecasts you completed assumed a terminal growth rate of 1%. What if the terminal rate had been 2%. What would your estimated stock price have been?
| Value | |
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e. What would WACC have to be to warrant the actual stock price on February 21, 2019?
| WACC | |
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