Estimating Share Value Using the ROPI Model Assume following are forecasts of Abercrombie & Fitch's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 29, 2011. Refer to the information in the table to answer the following requirements. 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 residual operating income (ROPI) model as of January 29, 2011. Rounding instructions: • Round answers to the nearest whole number unless noted otherwise. • Use your rounded answers for subsequent calculations. Do not use negative signs with any of your answers.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Estimating Share Value Using the ROPI Model
Assume following are forecasts of Abercrombie & Fitch's sales, net operating profit after tax
(NOPAT), and net operating assets (NOA) as of January 29, 2011. Refer to the information in the
table to answer the following requirements.
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 residual
operating income (ROPI) model as of January 29, 2011.
Rounding instructions:
• Round answers to the nearest whole number unless noted otherwise.
• Use your rounded answers for subsequent calculations.
Do not use negative signs with any of your answers.
Transcribed Image Text:Estimating Share Value Using the ROPI Model Assume following are forecasts of Abercrombie & Fitch's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 29, 2011. Refer to the information in the table to answer the following requirements. 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 residual operating income (ROPI) model as of January 29, 2011. Rounding instructions: • Round answers to the nearest whole number unless noted otherwise. • Use your rounded answers for subsequent calculations. Do not use negative signs with any of your answers.
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