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

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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Question

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?