Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Milano, Inc. has the following actual (for 2018) and forecast (for 2019 onwards) information:
Year
NOAEnd of Year
NOPAT
Additional Data
2020
$6,837.0
$737.0
WACC: 9.3%
(actual)
Cost of equity (KE): 11%
Terminal year growth rate: 1%
Net nonoperating obligations (NNO)
at the end of 2020: $4,640 million
Noncontrolling interest (NCI) at the
end of 2020: $299 million
2021
7,012.0
818.0
2022
8,193.0
902.0
2023
8,378.0
989.0
2024
8,570.0
979.0
Number of shares at the end of 2020:
862. 9 million
Terminal Year
8,655.7
988.8
Required:
Calculate the value of Milano stock at the end of 2020 using
(i) the Free Cash Flow and
(i1) Residual Operating Income (ROPI) valuation models.
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