Estimating Share Value Using the ROPI Model Following are forecasts of Illinois Tool Works Inc. sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018. Reported Horizon Period $ millions 2018 2019 2020 2021 2022 Terminal Period Sales $14,768 $15,654 $16,593 $17,589 $18,644 $19,017 NOPAT 2,711 2,880 3,053 3,236 3,430 3,499 NOA 9,462 10,028 10,630 11,268 11,944 12,183 Answer the following requirements assuming a discount rate (WACC) of 7.35%, a terminal period growth rate of 2%, common shares outstanding of 328.1 million, and net nonoperating obligations (NNO) of $6,204 million. (a) Estimate the value of a share of ITW’s common stock using the residual operating income model (ROPI) model as of December 31, 2018. Instructions: Round all answers to the nearest whole number, except for discount factors, shares outstanding (do not round), and stock price per share. Round discount factors to 5 decimal places. Round stock price per share to two decimal places. Do not use negative signs with any of your answers. Reported Horizon Period ($ millions) 2018 2019 2020 2021 2022 Terminal Period ROPI (NOPAT - [NOABeg × rw]) Answer Answer Answer Answer Answer Discount factor [1 / (1 + rw)t ] Answer Answer Answer Answer Present value of horizon ROPI Answer Answer Answer Answer Cum present value of horizon ROPI Answer Present value of terminal ROPI Answer NOA Answer Total firm value Answer NNO Answer Firm equity value Answer Shares outstanding (millions) Answer Stock price per share Answer
Estimating Share Value Using the ROPI Model Following are forecasts of Illinois Tool Works Inc. sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018. Reported Horizon Period $ millions 2018 2019 2020 2021 2022 Terminal Period Sales $14,768 $15,654 $16,593 $17,589 $18,644 $19,017 NOPAT 2,711 2,880 3,053 3,236 3,430 3,499 NOA 9,462 10,028 10,630 11,268 11,944 12,183 Answer the following requirements assuming a discount rate (WACC) of 7.35%, a terminal period growth rate of 2%, common shares outstanding of 328.1 million, and net nonoperating obligations (NNO) of $6,204 million. (a) Estimate the value of a share of ITW’s common stock using the residual operating income model (ROPI) model as of December 31, 2018. Instructions: Round all answers to the nearest whole number, except for discount factors, shares outstanding (do not round), and stock price per share. Round discount factors to 5 decimal places. Round stock price per share to two decimal places. Do not use negative signs with any of your answers. Reported Horizon Period ($ millions) 2018 2019 2020 2021 2022 Terminal Period ROPI (NOPAT - [NOABeg × rw]) Answer Answer Answer Answer Answer Discount factor [1 / (1 + rw)t ] Answer Answer Answer Answer Present value of horizon ROPI Answer Answer Answer Answer Cum present value of horizon ROPI Answer Present value of terminal ROPI Answer NOA Answer Total firm value Answer NNO Answer Firm equity value Answer Shares outstanding (millions) Answer Stock price per share Answer
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
Related questions
Question
Estimating Share Value Using the ROPI Model
Following are
| Reported | Horizon Period | |||||
|---|---|---|---|---|---|---|
| $ millions | 2018 | 2019 | 2020 | 2021 | 2022 | Terminal Period |
| Sales | $14,768 | $15,654 | $16,593 | $17,589 | $18,644 | $19,017 |
| NOPAT | 2,711 | 2,880 | 3,053 | 3,236 | 3,430 | 3,499 |
| NOA | 9,462 | 10,028 | 10,630 | 11,268 | 11,944 | 12,183 |
Answer the following requirements assuming a discount rate (WACC) of 7.35%, a terminal period growth rate of 2%, common shares outstanding of 328.1 million, and net nonoperating obligations (NNO) of $6,204 million.
(a) Estimate the value of a share of ITW’s common stock using the residual operating income model (ROPI) model as of December 31, 2018.
Instructions:
-
Round all answers to the nearest whole number, except for discount factors, shares outstanding (do not round), and stock price per share.
- Round discount factors to 5 decimal places.
- Round stock price per share to two decimal places.
- Do not use negative signs with any of your answers.
| Reported | Horizon Period | |||||
|---|---|---|---|---|---|---|
| ($ millions) | 2018 | 2019 | 2020 | 2021 | 2022 | Terminal Period |
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