Estimating Share Value Using the ROPI Model Following are forecasts of Home Depot's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 3, 2019, which the company labels fiscal 2018. Forecast Horizon Period Reported Terminal $ millions 2018 2019 2020 2021 2022 Period Sales $101,711 $108,830 $116,449 $124,600 $133,322 $135,989 NOPAT 11,349 12,189 13,043 13,955 14,932 15,231 NOA 24,013 25,692 27,490 29,414 31,474 32,103 Answer the following requirements assuming a discount rate (WACC) of 7.85%, a terminal period growth rate of 2%, common shares outstanding of 1,105 million, net nonoperating obligations (NNO) of $25,779 million. a. Estimate the value of a share of Home Depot common stock using the residual operating income (ROPI) model as of February 3, 2019. Note: Do not round until your final answer; round your final answer to two decimal places. Stock price per share: $ 0

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Estimating Share Value Using the ROPI Model
Following are forecasts of Home Depot's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 3, 2019, which the company labels fiscal
2018.
Forecast Horizon Period
Reported
Terminal
$ millions
2018
2019
2020
2021
2022
Period
Sales
$101,711 $108,830 $116,449 $124,600 $133,322 $135,989
NOPAT
11,349
12,189
13,043
13,955
14,932
15,231
NOA
24,013
25,692
27,490
29,414
31,474
32,103
Answer the following requirements assuming a discount rate (WACC) of 7.85%, a terminal period growth rate of 2%, common shares outstanding of 1,105 million, net
nonoperating obligations (NNO) of $25,779 million.
a. Estimate the value of a share of Home Depot common stock using the residual operating income (ROPI) model as of February 3, 2019.
Note: Do not round until your final answer; round your final answer to two decimal places.
Stock price per share: $ 0
Transcribed Image Text:Estimating Share Value Using the ROPI Model Following are forecasts of Home Depot's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 3, 2019, which the company labels fiscal 2018. Forecast Horizon Period Reported Terminal $ millions 2018 2019 2020 2021 2022 Period Sales $101,711 $108,830 $116,449 $124,600 $133,322 $135,989 NOPAT 11,349 12,189 13,043 13,955 14,932 15,231 NOA 24,013 25,692 27,490 29,414 31,474 32,103 Answer the following requirements assuming a discount rate (WACC) of 7.85%, a terminal period growth rate of 2%, common shares outstanding of 1,105 million, net nonoperating obligations (NNO) of $25,779 million. a. Estimate the value of a share of Home Depot common stock using the residual operating income (ROPI) model as of February 3, 2019. Note: Do not round until your final answer; round your final answer to two decimal places. Stock price per share: $ 0
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