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 Terminal 2019 2020 2021 2022 Period $99,547 $106,515 $113,971 $121,949 $130,485 $133,095 11,107 11,930 12,765 13,658 14,614 14,907 23,502 25,145 26,905 28,789 30,804 31,420 Forecast Horizon Period millions 2018 Sales 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 $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: $ 189.87 x b. Home Depot stock closed at $174.86 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? Stock price is appropriately valued * ✔
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 Terminal 2019 2020 2021 2022 Period $99,547 $106,515 $113,971 $121,949 $130,485 $133,095 11,107 11,930 12,765 13,658 14,614 14,907 23,502 25,145 26,905 28,789 30,804 31,420 Forecast Horizon Period millions 2018 Sales 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 $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: $ 189.87 x b. Home Depot stock closed at $174.86 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? Stock price is appropriately valued * ✔
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
Related questions
Question
Godo
Transcribed Image Text: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
Sales
NOPAT
NOA
Required
Forecast Horizon Period
Terminal
2019 2020 2021 2022 Period
$99,547 $106,515 $113,971 $121,949 $130,485 $133,095
11,107 11,930 12,765 13,658 14,614 14,907
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.
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: $189.87 x
b. Home Depot stock closed at $174.86 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?
Stock price is appropriately valued
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education