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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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.
$ millions
Sales
NOPAT
NOA
Required
Forecast Horizon Period
Reported
2018 2019 2020 2021 2022
$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
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?
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