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 Reported Forecast Horizon Period Terminal millions 2018 2019 2020 2021 Sales NOPAT NOA 2022 $57,432 $58,286 $59,152 $60,032 $60,924 3,012 3,062 3,100 3,139 3,178 3,204 4,552 4,617 4,678 4,741 4,804 4,847 Period $61,528 Answer the following requirements with the following assumptions: Assumptions
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 Reported Forecast Horizon Period Terminal millions 2018 2019 2020 2021 Sales NOPAT NOA 2022 $57,432 $58,286 $59,152 $60,032 $60,924 3,012 3,062 3,100 3,139 3,178 3,204 4,552 4,617 4,678 4,741 4,804 4,847 Period $61,528 Answer the following requirements with the following assumptions: Assumptions
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:(a) Estimate the value of a share of Humana's common stock using the discounted cash flow (DCF) model as of December 31, 2018.
Reported
Forecast Horizon
Terminal
2018
2020
2021
Period
($ 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
$
$
0
0
0
O O O O
0
0
$
2019
O O O
0 $
0
0 $
0
0
0 $
0
0
2022
0 $
0
0
0
0
Transcribed Image Text: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
Sales
$
millions 2018 2019 2020 2021 2022 Period
$57,432 $58,286 $59,152 $60,032 $60,924 $61,528
3,012 3,062 3,100 3,139 3,178 3,204
4,552 4,617 4,678 4,741 4,804 4,847
NOPAT
NOA
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) $(5,609) million
Noncontrolling interest
$0 million
NNO is negative because Humana's nonoperating assets exceed its nonoperating liabilities.
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