Estimating Share Value Using the DCF Model Following are forecasts of Target Corporation's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 30, 2016 Reported Horizon Period Terminal $ millions 2016 2017 2018 2019 2020 Period Sales $74,673 $76,166 $77,689 $79,243 $80,828 $81,636 NOPAT 3,360 3,427 3,496 3,566 3,637 3,674 NOA 22,402 22,850 23,307 23,773 24,248 24,491 Answer the following requirements assuming a terminal period growth rate of 1%, a discount rate (WACC) of 6%, common shares outstanding of 602 million, and net nonoperating obligations (NNO) of $8,488 million. Estimate the value of a share of Target common stock using the discounted cash flow (DCF) model as of January 30, 2016. Instructions: Round all answers to the nearest whole number, except for discount factors and stock price per share. Round discount factors to 5 decimal places. Round stock price per share to two decimal places. Do not use negative signs with any of your answers. Reported Forecast Horizon Terminal ($ millions) 2016 2017 2018 2019 2020 Period Increase in NOA Answer Answer Answer Answer Answer FCFF (NOPAT - Increase in NOA) Answer Answer Answer Answer Answer Discount factor [1/(1+rw)t] Answer Answer Answer Answer Present value of horizon FCFF Answer Answer Answer Answer Cum. present value of horizon FCFF Answer Present value of terminal FCFF Answer Total firm value Answer NNO Answer Firm equity value Answer Shares outstanding (millions) Answer Stock price per share Answer

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter12: Valuation: Cash-flow Based Approaches

Section: Chapter Questions

Problem 1LIC

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Estimating Share Value Using the DCF Model
Following are forecasts of Target Corporation's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 30, 2016

	Reported	Horizon Period	Terminal
$ millions	2016	2017	2018	2019	2020	Period
Sales	$74,673	$76,166	$77,689	$79,243	$80,828	$81,636
NOPAT	3,360	3,427	3,496	3,566	3,637	3,674
NOA	22,402	22,850	23,307	23,773	24,248	24,491

Answer the following requirements assuming a terminal period growth rate of 1%, a discount rate (WACC) of 6%, common shares outstanding of 602 million, and net nonoperating obligations (NNO) of $8,488 million.

Estimate the value of a share of Target common stock using the discounted cash flow (DCF) model as of January 30, 2016.

Instructions:

Round all answers to the nearest whole number, except for discount factors and stock price per share.
Round discount factors to 5 decimal places.
Round stock price per share to two decimal places.
Do not use negative signs with any of your answers.

	Reported	Forecast Horizon	Terminal
($ millions)	2016	2017	2018	2019	2020	Period
Increase in NOA		Answer	Answer	Answer	Answer	Answer
FCFF (NOPAT - Increase in NOA)		Answer	Answer	Answer	Answer	Answer
Discount factor [1/(1+rw)t]		Answer	Answer	Answer	Answer
Present value of horizon FCFF		Answer	Answer	Answer	Answer
Cum. present value of horizon FCFF	Answer
Present value of terminal FCFF	Answer
Total firm value	Answer
NNO	Answer
Firm equity value	Answer
Shares outstanding (millions)	Answer
Stock price per share	Answer

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