Estimating Share Value Using the ROPI Model Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018, for Humana. Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal placi Reported Horizon period 2019 NOA S millions 2018 2020 2021 2022 Sales $56,880 $57,734 $58,600 $59,480 $60,372 $60,976 NOPAT 2,492 2,542 2.580 2,619 2,658 2,684 4,000 4,065 4,126 4,189 4,252 4,295 Terminal Period Answer the following requirements with the following assumptions: Assumptions Terminal period growth rate Discount rate (WACC) Common shares outstanding 196 7.8% 135.6 million Net nonoperating obligations (NNO) S(6,161) million NNO is negative because Humana's nonoperating assets exceed its nonoperating liabilities. (a) Estimate the value of a share of common stock using the residual operating income (ROPI) model as of December 31, 2018. ($ millions) Reported 2018 Forecast Horizon 2019 2020 2021 2022 Terminal Period ROPI (NOPAT-INOABeg xrw]) $ Present value of horizon ROPI 05 ° 05 0 05 0 0 Cum present value of horizon ROPIS 0 Present value of terminal ROPI 0 NOA 0 Total firm value Less NNO ° Firm equity value $ 0 Shares outstanding (millions) 0 Stock price per share $
Estimating Share Value Using the ROPI Model Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018, for Humana. Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal placi Reported Horizon period 2019 NOA S millions 2018 2020 2021 2022 Sales $56,880 $57,734 $58,600 $59,480 $60,372 $60,976 NOPAT 2,492 2,542 2.580 2,619 2,658 2,684 4,000 4,065 4,126 4,189 4,252 4,295 Terminal Period Answer the following requirements with the following assumptions: Assumptions Terminal period growth rate Discount rate (WACC) Common shares outstanding 196 7.8% 135.6 million Net nonoperating obligations (NNO) S(6,161) million NNO is negative because Humana's nonoperating assets exceed its nonoperating liabilities. (a) Estimate the value of a share of common stock using the residual operating income (ROPI) model as of December 31, 2018. ($ millions) Reported 2018 Forecast Horizon 2019 2020 2021 2022 Terminal Period ROPI (NOPAT-INOABeg xrw]) $ Present value of horizon ROPI 05 ° 05 0 05 0 0 Cum present value of horizon ROPIS 0 Present value of terminal ROPI 0 NOA 0 Total firm value Less NNO ° Firm equity value $ 0 Shares outstanding (millions) 0 Stock price per share $
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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![Estimating Share Value Using the ROPI Model
Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018, for Humana.
Terminal
Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal place
Reported
Horizon period
$ millions 2018
2019 2020 2021
2022 Period
Sales
$56,880 $57,734 $58,600 $59,480 $60,372
2,492 2,542 2,580 2.619 2,658
4,000 4,065 4,126 4,189 4,252
NOPAT
NOA
$60,976
2,684
4,295
Answer the following requirements with the following assumptions:
Assumptions
Terminal period growth rate
Discount rate (WACC)
19
7.8%
Common shares outstanding
135.6 million
Net nonoperating obligations (NNO) S(6,161) million
NNO is negative because Humana's nonoperating assets exceed its nonoperating liabilities.
(a) Estimate the value of a share of common stock using the residual operating income (ROPI) model as of December 31, 2018.
Forecast Horizon
($ millions)
Reported
2018
Terminal
2019
2020
2021
2022
Period
ROPI (NOPAT-[NOABeg xrw])
$
05
0
05
0
05
0
0
Present value of horizon ROPI
Cum present value of horizon ROPIS
Present value of terminal ROPI
NOA
0
0
0
Total firm value
0
Less NNO
0
Firm equity value
$
0
Shares outstanding (millions))
0
Stock price per share
$
0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2ac292fe-106c-470b-8424-bed5fea67afc%2Fd8a81547-1d91-49a7-8a9c-f318b1e9f250%2Fr4zemi_processed.png&w=3840&q=75)
Transcribed Image Text:Estimating Share Value Using the ROPI Model
Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018, for Humana.
Terminal
Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal place
Reported
Horizon period
$ millions 2018
2019 2020 2021
2022 Period
Sales
$56,880 $57,734 $58,600 $59,480 $60,372
2,492 2,542 2,580 2.619 2,658
4,000 4,065 4,126 4,189 4,252
NOPAT
NOA
$60,976
2,684
4,295
Answer the following requirements with the following assumptions:
Assumptions
Terminal period growth rate
Discount rate (WACC)
19
7.8%
Common shares outstanding
135.6 million
Net nonoperating obligations (NNO) S(6,161) million
NNO is negative because Humana's nonoperating assets exceed its nonoperating liabilities.
(a) Estimate the value of a share of common stock using the residual operating income (ROPI) model as of December 31, 2018.
Forecast Horizon
($ millions)
Reported
2018
Terminal
2019
2020
2021
2022
Period
ROPI (NOPAT-[NOABeg xrw])
$
05
0
05
0
05
0
0
Present value of horizon ROPI
Cum present value of horizon ROPIS
Present value of terminal ROPI
NOA
0
0
0
Total firm value
0
Less NNO
0
Firm equity value
$
0
Shares outstanding (millions))
0
Stock price per share
$
0
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