Estimating Share Value Using the DCF Model Following are forecasts of Home Depot's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 3, 2019, which the company labels fiscal 2018. Reported $ millions 2018 2019 2020 2021 2022 Sales $106,039 $113,461 $121,404 $129,902 $138,995 11,832 12,708 13,598 14,549 15,567 25,035 26,785 28,660 30,666 32,813 NOPAT NOA Forecast Horizon Period Required Answer the following requirements assuming a discount rate (WACC) of 7.85 %, a terminal period growth rate of 2%, common shares outstanding of 1,105 million, net nonoperating obligations (NNO) of $26,876 million. Terminal Period $141,776 15,879 33,469 Stock price per share: $ a. Estimate the value of a share of Home Depot's common stock using the discounted cash flow (DCF) model as of February 3, 2019. Note: Do not round until your final answer; round your final answer to two decimal places. b. Home Depot stock closed at $186.26 on March 28, 2019, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price?

Estimating Share Value Using the DCF Model Following are forecasts of Home Depot's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 3, 2019, which the company labels fiscal 2018. Reported $ millions 2018 2019 2020 2021 2022 Sales $106,039 $113,461 $121,404 $129,902 $138,995 11,832 12,708 13,598 14,549 15,567 25,035 26,785 28,660 30,666 32,813 NOPAT NOA Forecast Horizon Period Required Answer the following requirements assuming a discount rate (WACC) of 7.85 %, a terminal period growth rate of 2%, common shares outstanding of 1,105 million, net nonoperating obligations (NNO) of $26,876 million. Terminal Period $141,776 15,879 33,469 Stock price per share: $ a. Estimate the value of a share of Home Depot's common stock using the discounted cash flow (DCF) model as of February 3, 2019. Note: Do not round until your final answer; round your final answer to two decimal places. b. Home Depot stock closed at $186.26 on March 28, 2019, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price?

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter3: Financial Statements, Cash Flow, And Taxes

Section: Chapter Questions

Problem 19SP

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Estimating Share Value Using the DCF Model Following are forecasts of Home Depot's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 3, 2019, which the company labels fiscal 2018. Reported S millions 2018 Sales NOPAT NOA Forecast Horizon Period Terminal 2019 2020 2021 2022 Period $108,203 $115,777 $123,882 $132,553 $141,832 $144,669 12,073 12,967 13,875 14,846 15,885 16,203 27,332 29,245 31,292 33,483 34,152 25,546 Answer the following requirements assuming a discount rate (WACC) of 7.85%, a terminal period growth rate of 2%, common shares outstanding of 1,105 million, net nonoperating obligations (NNO) of $27,424 million. Required a. Estimate the value of a share of Home Depot's common stock using the discounted cash flow (DCF) model as of February 3, 2019. Note: Do not round until your final answer; round your final answer to two decimal places. Stock price per share: $ b. Home Depot stock closed at $190.06 on March 28, 2019, the date the…
Estimating Share Value Using the DCF Model Following are forecasts of Home Depot's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 3, 2019, which the company labels fiscal 2018. Forecast Horizon Period Reported Terminal S millions 2018 2019 2020 2021 2022 Period Sales $99,547 $106,515 $113,971 $121,949 $130,485 $133,095 NOPAT 11,107 11,930 12,765 13,658 14,614 14,907 NOA 23,502 25,145 26,905 28,789 30,804 31,420 Answer the following requirements assuming a discount rate (WACC) of 7.85%, a terminal period growth rate of 2%, common shares outstanding of 1,105 million, net nonoperating obligations (NNO) of $25,230 million. Required a. Estimate the value of a share of Home Depot's common stock using the discounted cash flow (DCF) model as of February 3, 2019. Note: Do not round until your final answer; round your final answer to two decimal places. Stock price per share: $ 0 b. Home Depot stock closed at $174.86 on March 28, 2019, the date the…
Estimating Share Value Using the ROPI Model Following are forecasts of Home Depot's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 3, 2019, which the company labels fiscal 2018. Forecast Horizon Period Reported Terminal $ millions 2018 2019 2020 2021 2022 Period Sales $101,711 $108,830 $116,449 $124,600 $133,322 $135,989 NOPAT 11,349 12,189 13,043 13,955 14,932 15,231 NOA 24,013 25,692 27,490 29,414 31,474 32,103 Answer the following requirements assuming a discount rate (WACC) of 7.85%, a terminal period growth rate of 2%, common shares outstanding of 1,105 million, net nonoperating obligations (NNO) of $25,779 million. a. Estimate the value of a share of Home Depot common stock using the residual operating income (ROPI) model as of February 3, 2019. Note: Do not round until your final answer; round your final answer to two decimal places. Stock price per share: $ 0
Estimating Share Value Using the DCF Model Following are forecasts of Home Depot's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 3, 2019, which the company labels fiscal 2018. Module Forecast Horizon Period Reported Terminal $ millions 2018 2019 2020 2021 2022 Period Sales $108,203 $115,777 $123,882 $132,553 $141,832 $144,669 12,073 12,967 13,875 14,846 15,885 16,203 25,546 27,332 29,245 31,292 33,483 34,152 NOPAT NOA Answer the following requirements assuming a discount rate (WACC) of 7.85%, a terminal period growth rate of 2%, common shares outstanding of 1,105 million, net nonoperating obligations (NNO) of $27,424 million. Required a. Estimate the value of a share of Home Depot's common stock using the discounted cash flow (DCF) model as of February 3, 2019. Note: Do not round until your final answer; round your final answer to two decimal places. Stock price per share: $ 519 b. Home Depot stock closed at $190.06 on March 28, 2019, the…
Estimating Share Value Using the DCF Model Following are forecasts of Target Corporation's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 2, 2019, which we label fiscal year 2018. 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. Reported Forecast Horizon Period $ millions 2018 Terminal 2019 2020 2021 2022 $79,124 $83,830 $87,234 $92,346 Period $93,428 4,767 Sales $76,106 NOPAT 3,269 NOA 23,770 4,152 3,572 4,501 3,939 24,197 26,157 26,677 28,761 28,571 Answer the following requirements with the following assumptions: Assumptions Terminal period growth rate 2% Discount rate (WACC) 7.63% Common shares outstanding 517.80 million Net nonoperating obligations (NNO) $12,473 million Estimate the value of a share of Target common stock using the discounted cash flow (DCF) model as of February 2, 2019. ($ millions) Increase in NOA…
Estimating Share Value Using the DCF ModelFollowing are forecasts of Home Depot’s sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 3, 2019, which the company labels fiscal 2018. Forecast Horizon Period Reported Terminal $ millions 2018 2019 2020 2021 2022 Period Sales $103,875 $111,146 $118,927 $127,251 $136,159 $138,882 NOPAT 11,590 12,448 13,320 14,252 15,250 15,555 NOA 24,524 26,239 28,075 30,040 32,144 32,786 Answer the following requirements assuming a discount rate (WACC) of 7.85%, a terminal period growth rate of 2%, common shares outstanding of 1,105 million, net nonoperating obligations (NNO) of $26,327 million. Requireda. Estimate the value of a share of Home Depot’s common stock using the discounted cash flow (DCF) model as of February 3, 2019.Note: Do not round until your final answer; round your final answer to two decimal places.Stock price per share: $Answer b. Home Depot stock closed at…
Estimating Share Value Using the ROPI Model Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018, for Humana. 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. Reported Horizon period Terminal millions Sales NOPAT NOA 2018 2019 2020 2021 2022 $56,912 $57,766 $58,632 $59,512 $60,404 2,492 2,542 2,580 2,619 2,658 4,097 4,158 4,221 4,284 4,032 Answer the following requirements with the following assumptions: Assumptions Terminal period growth rate 1% Discount rate (WACC) 7.8% Common shares outstanding 135.6 million Net nonoperating obligations (NNO) $(6,129) million ($ millions) ROPI (NOPAT- [NOABeg x rw]) Present value of horizon ROPI Cum present value of horizon ROPI $ Present value of terminal ROPI NOA Total firm value Less NNO Firm equity value Shares outstanding (millions) Stock price per…
Estimating Share Value Using the DCF Model Following are forecasts of Target Corporation's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 2, 2019, which we label fiscal year 2018. 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. Reported Forecast Horizon Period Terminal $ millions 2018 2019 Sales $75,356 NOPAT 3,269 NOA 23,020 2020 2021 Period $79,124 $83,080 $87,234 $91,596 $93,428 3,402 3,572 3,751 3,939 4,017 24,197 25,407 26,677 28,011 28,571 2022 Answer the following requirements with the following assumptions: Assumptions Terminal period growth rate 296 Discount rate (WACC) 7.63% Common shares outstanding 517.80 million Net nonoperating obligations (NNO) $11,723 million Estimate the value of a share of Target common stock using the discounted cash flow (DCF) model as of February 2, 2019. ($ millions) Increase in NOA…
Estimating Share Value Using the DCF Model Following are forecasted sales, NOPAT, and NOA for Colgate-Palmolive Company for 2019 through 2022. Colgate Palmolive $ millions Sales... NOPAT. NOA. Reported 2018 $15,544 2,737 5,837 Forecast Horizon Period 2019 2020 2021 2022 $16,010 $16,491 $16,985 $17,495 2,818 2,902 2,989 3,079 6,012 6,193 6,378 6,570 Required a. Forecast the terminal period values assuming a 1% terminal period growth for all three model inputs, that is Sales, NOPAT, and NOA. b. Estimate the value of a share of Colgate-Palmolive common stock using the discounted cash flow (DCF) model; assume a discount rate (WACC) of 5.7%, common shares outstanding of 862.9 million, net nonoperating obligations (NNO) of $5,640 million, and noncontrolling interest (NCI) from the balance sheet of $299 million. 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?…
Estimating Share Value Using the ROPI ModelFollowing are forecasts of Illinois Tool Works Inc. sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018. Reported Horizon Period $ millions 2018 2019 2020 2021 2022 Terminal Period Sales $14,768 $15,654 $16,593 $17,589 $18,644 $19,017 NOPAT 2,711 2,880 3,053 3,236 3,430 3,499 NOA 9,462 10,028 10,630 11,268 11,944 12,183 Answer the following requirements assuming a discount rate (WACC) of 7.35%, a terminal period growth rate of 2%, common shares outstanding of 328.1 million, and net nonoperating obligations (NNO) of $6,204 million.(a) Estimate the value of a share of ITW’s common stock using the residual operating income model (ROPI) model as of December 31, 2018. Instructions: Round all answers to the nearest whole number, except for discount factors, shares outstanding (do not round), and stock price per share. Round discount factors to 5 decimal places. Round stock…
Estimating Share Value Using the ROPI ModelFollowing are forecasts of Illinois Tool Works Inc. sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018. Reported Horizon Period $ millions 2018 2019 2020 2021 2022 Terminal Period Sales $14,768 $15,654 $16,593 $17,589 $18,644 $19,017 NOPAT 2,711 2,880 3,053 3,236 3,430 3,499 NOA 9,462 10,028 10,630 11,268 11,944 12,183 Answer the following requirements assuming a discount rate (WACC) of 7.35%, a terminal period growth rate of 2%, common shares outstanding of 328.1 million, and net nonoperating obligations (NNO) of $6,204 million.(a) Estimate the value of a share of ITW’s common stock using the residual operating income model (ROPI) model as of December 31, 2018. Instructions: Round all answers to the nearest whole number, except for discount factors, shares outstanding (do not round), and stock price per share. Round discount factors to 5 decimal places. Round stock…
Estimating Share Value Using the DCF Model Following are forecasts of Target Corporation's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 2, 2019, which we label fiscal year 2018. 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. Reported Forecast Horizon Period Terminal $ millions 2018 Sales $75,956 NOPAT NOA 3,269 23,620 2019 2020 2021 2022 $79,124 $83,680 $87,234 $92,196 4,002 3,572 4,351 3,939 24,197 26,007 26,677 28,611 Period $93,428 4,617 28,571 Answer the following requirements with the following assumptions: Assumptions Terminal period growth rate Discount rate (WACC) Common shares outstanding 2% 7.63% 517.80 million Net nonoperating obligations (NNO) $12,323 million Estimate the value of a share of Target common stock using the discounted cash flow (DCF) model as of February 2, 2019. Increase in NOA ($ millions)…