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?

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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Obtain Target Corporation's annual report for its 2018 fiscal year (year ended February 2, 2019) at http://investors.target.com a. What was Target's gross margin percentage for the fiscal year ended February 2, 2019 (2018) and 2017? Use "Sales" for these computations b. What was Target's Return on Sales percentage for 2018 and 2017? Use "Total Revenue" for these computations. c. Target's return on ales percentage for 2017 was higher than it was in 2018. Ignoring taxes, how much higher would Target's 2018 net income have been if it's return on sales percentage in 2018 had been the same as for 2017?
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 $15,544 $16,010 $16,491 $16,985 $17,495 Answer NOPAT 2,737 2,818 2,902 2,989 3,079 Answer NOA 5,837 6,012 6,193 6,378 6,570 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 863.0 million Net…
You have been supplied with the following data for Jazz Limited and its industry averages. Balance Sheet March 31, 2020 Assets: Cash Liabilities and Equity: Accounts Payable Accrued expenses Other current liabilities 12.300 31,500 Accounts Receivable Merchandise Inventory Plant and Equipment 36,000 60,800 1,200 26,000 Long-term debt 10% Preference share capital Ordinary share capital Retained Earnings 151,000 34,000 40,000 100,000 27,400 Total Assets P260,100 Total Liabilities and Equity P260,100 Income Statement March 31, 2020 Sales 225,000 Less: Cost of goods sold Selling expenses Administrative expenses Research and development exp. Interest expense Earnings before taxes Less: Income tax (35%) Net income 152,500 29,500 14,800 6,500 2.900 206,200 18,800 6.580 12.220 5,000 Dividends paid to equity holders Financial Ratios of Company Current ratio Stock turnover Collection period Debt to Equity Interest coverage ratio Asset turnover Financial Ratios of industry 2.2 2.8 times 56 days…
Estimating Share Value Using the DCF ModelAssume following are forecasts of Abercrombie & Fitch's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 29, 2011. Reported Horizon Period (In millions) 2011 2012 2013 2014 2015 Terminal Period Sales $ 3,750 $ 4,500 $ 5,400 $ 6,480 $ 7,776 $ 7,853 NOPAT 464 539 654 794 982 960 NOA 1,320 1,602 1,933 2,332 2,791 2,802 Answer the following requirements assuming a discount rate (WACC) of 13.3%, a terminal period growth rate of 1%, common shares outstanding of 86.2 million, and net nonoperating obligations (NNO) of $(261) million (negative NNO reflects net nonoperating assets such as investments rather than net obligations).(a) Estimate the value of a share of Abercrombie & Fitch common stock using the discounted cash flow (DCF) model as of January 29, 2011. Rounding instructions: Round answers to the nearest whole number unless noted otherwise. Use your rounded answers for…
Estimating Share Value Using the ROPI Model Following are forecasted sales, NOPAT, and NOA for Colgate-Palmolive Company for 2019 through 2022. Forecast Horizon Period Colgate Palmolive (CL) Reported $ millions 2018 2019 2020 2021 2022 Sales $13,990 $14,409 $14,842 $15,287 $15,746 NOPAT 2,463 2,536 2,612 2,690 2,771 NOA 5,253 5,411 5,574 5,740 5,913 a. Forecast the terminal period values for Sales, NOPAT, and NOA, assuming a 1% terminal period growth rate. Note: Round answers to the nearest dollar. Terminal period sales 2$ 15,903 Terminal period NOPAT $ 2,799 Terminal period NOA 2$ 5,972 b. Estimate the value of a share of Colgate-Palmolive common stock using the residual operating income (ROPI) model. Assume a discount rate (WACC) of 5.70%, common shares outstanding of 862.9 million, net nonoperating obligations (NNO) of $5,076 million, and noncontrolling interest (NCI) from the balance sheet of $269 million. Note: Round answers to two decimal places. $ 0 c. Colgate-Palmolive stock…
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Prepare a horizontal analysis of the following comparative income statement for the Buff Bodies Corporation. Round percentage changes to the nearest one-hundredth percent. Buff Bodies Corporation Comparative Income Statement for the Years Ended December 31, 2020 and 2019 2020 2019 Total revenue $1,450,000 $1,300,000 Expenses: Cost of goods sold $ 1,023,000 $ 930,000 Operating expenses 310,000 275,000 Interest expense 12,000 10,000 Income tax expense 48,300 38,000 Total expenses $1,393,300 $1,253,000 Net income $ 56,700 $ 47,000
Estimating Share Value Using the DCF 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 Forecast Horizon Period Terminal $ millions Sales NOPAT NOA 2021 2022 2020 2018 2019 $57,472 $58,326 $59,192 $60,072 $60,964 3,179 3,218 3,140 3,052 3,102 4,844 4,657 4,718 4,781 4,592 Period $61,568 3,244 4,887 Answer the following requirements with the following assumptions: Assumptions Terminal period growth rate 1% Discount rate (WACC) 7.8% Common shares outstanding 135.60 million Net nonoperating obligations (NNO) $(5,569) million Noncontrolling interest $0 million NNO is negative because Humana's nonoperating assets exceed its nonoperating liabilities. (a) Estimate the value of a share of Humana's common stock using the…

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