Estimating Share Value Using the DCF Model Following are forecasts of Illinois Tool Works Inc. sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018. 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. Forecast Horizon Period Terminal Reported 2018 2019 2020 2021 2022 Period $5,907 $6,262 $6,637 $7,036 $7,458 $7,607 1,084 1,152 1,221 1,294 1,372 3,785 4,011 4,252 4,507 4,778 1,400 4,873 $ millions Sales NOPAT NOA Answer the following requirements with the following assumptions: Assumptions Terminal period growth rate Discount rate (WACC) Common shares outstanding 2% 7.35% 131.00 million Net nonoperating obligations (NNO) $2,482 million (a) Estimate the value of a share of ITW's common stock using the discounted cash flow (DCF) model as of December 31, 2018. Forecast Horizon ($ millions) Increase in NOA FCFF (NOPAT - Increase in NOA) Present value of horizon FCFF Cum. present value of horizon FCFF $ Present value of terminal FCFF Total firm value NNO Firm equity value Shares outstanding (millions) Stock price per share $ $ Reported 2018 $ 2019 $ 2020 $ 2021 $ 2022 Terminal Period $
Estimating Share Value Using the DCF Model Following are forecasts of Illinois Tool Works Inc. sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018. 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. Forecast Horizon Period Terminal Reported 2018 2019 2020 2021 2022 Period $5,907 $6,262 $6,637 $7,036 $7,458 $7,607 1,084 1,152 1,221 1,294 1,372 3,785 4,011 4,252 4,507 4,778 1,400 4,873 $ millions Sales NOPAT NOA Answer the following requirements with the following assumptions: Assumptions Terminal period growth rate Discount rate (WACC) Common shares outstanding 2% 7.35% 131.00 million Net nonoperating obligations (NNO) $2,482 million (a) Estimate the value of a share of ITW's common stock using the discounted cash flow (DCF) model as of December 31, 2018. Forecast Horizon ($ millions) Increase in NOA FCFF (NOPAT - Increase in NOA) Present value of horizon FCFF Cum. present value of horizon FCFF $ Present value of terminal FCFF Total firm value NNO Firm equity value Shares outstanding (millions) Stock price per share $ $ Reported 2018 $ 2019 $ 2020 $ 2021 $ 2022 Terminal Period $
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 Illinois Tool Works Inc. sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018.
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.
Terminal
Forecast Horizon Period
2019 2020 2021 2022
Period
$7,607
$6,262 $6,637 $7,036 $7,458
$5,907
1,084 1,152 1,221 1,294 1,372
1,400
3,785 4,011 4,252 4,507 4,778
4,873
$ millions
Sales
NOPAT
NOA
Reported
2018
Answer the following requirements with the following assumptions:
Assumptions
Terminal period growth rate
2%
7.35%
Discount rate (WACC)
Common shares outstanding
131.00 million
Net nonoperating obligations (NNO) $2,482 million
(a) Estimate the value of a share of ITW's common stock using the discounted cash flow (DCF) model as of December 31, 2018.
Forecast Horizon
($ millions)
Increase in NOA
FCFF (NOPAT - Increase in NOA)
Present value of horizon FCFF
Cum. present value of horizon FCFF
Present value of terminal FCFF
Total firm value
$
NNO
Firm equity value
Shares outstanding (millions)
Stock price per share
$
$
Reported
2018
$
2019
$
2020
$
2021
$
2022
Terminal
Period
$
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