Estimating Share Value Using the ROPI Model Following are forecasted sales, NOPAT, and NOA for Colgate-Palmolive Company for 2019 through 2022. Forecast Horizon Period Colgate Palmolive (CL) Reported S millions 2018 2019 2020 2021 2022 Sales $13,990 $14,409 $14,842 $15,287 $15,746 NOPAT 2,463 2,536 2,612 2,690 2,771 NOA 5,253 5,411 5,574 5,740 5,913 a. Forecast the terminal period values for Sales, NOPAT, and NOA, assuming a 1% terminal period growth rate. Note: Round answers to the nearest dollar. Terminal period sales s 15,903 v Terminal period NOPAT $ 2,799 v Terminal period NOA 5,972 v b. Estimate the value of a share of Colgate-Palmolive common stock using the residual operating income (ROPI) model. Assume a discount rate (WACC) of 5.70%, common shares outstanding of 862.9 million, net nonoperating obligations (NNO) of $5,076 million, and noncontrolling interest (NCI) from the balance sheet of $269 million. Note: Round answers to two decimal places. c. Colgate-Palmolive stock closed at $60.03 on February 21, 2019, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? Stock price is overvalued d. The forecasts assumed a terminal growth rate of 1%. If the terminal growth rate had been 2%, what would the estimated stock price have been? Note: Round answers to two decimal places. $ 0 e. What would WACC need to be to warrant the actual stock price on February 21, 2019? Note: Round answer to two decimal places (for example, 0.0674533 = 6.75%).
Estimating Share Value Using the ROPI Model Following are forecasted sales, NOPAT, and NOA for Colgate-Palmolive Company for 2019 through 2022. Forecast Horizon Period Colgate Palmolive (CL) Reported S millions 2018 2019 2020 2021 2022 Sales $13,990 $14,409 $14,842 $15,287 $15,746 NOPAT 2,463 2,536 2,612 2,690 2,771 NOA 5,253 5,411 5,574 5,740 5,913 a. Forecast the terminal period values for Sales, NOPAT, and NOA, assuming a 1% terminal period growth rate. Note: Round answers to the nearest dollar. Terminal period sales s 15,903 v Terminal period NOPAT $ 2,799 v Terminal period NOA 5,972 v b. Estimate the value of a share of Colgate-Palmolive common stock using the residual operating income (ROPI) model. Assume a discount rate (WACC) of 5.70%, common shares outstanding of 862.9 million, net nonoperating obligations (NNO) of $5,076 million, and noncontrolling interest (NCI) from the balance sheet of $269 million. Note: Round answers to two decimal places. c. Colgate-Palmolive stock closed at $60.03 on February 21, 2019, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? Stock price is overvalued d. The forecasts assumed a terminal growth rate of 1%. If the terminal growth rate had been 2%, what would the estimated stock price have been? Note: Round answers to two decimal places. $ 0 e. What would WACC need to be to warrant the actual stock price on February 21, 2019? Note: Round answer to two decimal places (for example, 0.0674533 = 6.75%).
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 ROPI Model
Following are forecasted sales, NOPAT, and NOA for Colgate-Palmolive Company for 2019 through 2022.
Forecast Horizon Period
Colgate Palmolive (CL) Reported
$ millions
2018
2019
2020
2021
2022
Sales
$13,990
$14,409 $14,842 $15,287 $15,746
NOPAT
2,463
2,536
2,612
2,690
2,771
NOA
5,253
5,411
5,574
5,740
5,913
a. Forecast the terminal period values for Sales, NOPAT, and NOA, assuming a 1% terminal period growth rate.
Note: Round answers to the nearest dollar.
Terminal period sales
2$
15,903
Terminal period NOPAT $
2,799
Terminal period NOA
2$
5,972
b. Estimate the value of a share of Colgate-Palmolive common stock using the residual operating income (ROPI) model. Assume a discount rate (WACC) of 5.70%, common
shares outstanding of 862.9 million, net nonoperating obligations (NNO) of $5,076 million, and noncontrolling interest (NCI) from the balance sheet of $269 million.
Note: Round answers to two decimal places.
$ 0
c. Colgate-Palmolive stock closed at $60.03 on February 21, 2019, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing
price?
Stock price is overvalued
d. The forecasts assumed a terminal growth rate of 1%. If the terminal growth rate had been 2%, what would the estimated stock price have been?
Note: Round answers to two decimal places.
$ 0
e. What would WACC need to be to warrant the actual stock price on February 21, 2019?
Note: Round answer to two decimal places (for example, 0.0674533 = 6.75%).
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