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. 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 places. Reported Forecast Horizon Period $ millions 2018 2019 2020 2021 2022 Sales $14,030 $14,871 $15,763 $16,710 $17,712 NOPAT NOA Terminal Period $18,066 2,711 2,880 3,053 3,236 3,430 8,989 9,527 10,099 10,705 11,347 3,499 11,574 Answer the following requirements with the following assumptions: Assumptions Terminal period growth rate Discount rate (WACC) 2% 7.35% Common shares outstanding 328.1 million Net nonoperating obligations (NNO) $5,894 million (a) Estimate the value of a share of ITW's common stock using the residual operating income model (ROPI) model as of December 31, 2018. Forecast Horizon ($ millions) Reported 2018 Terminal 2019 2020 2021 2022 Period ROPI (NOPAT-[NOABeg x rw]) Present value of horizon ROPI $ 0 $ 0 0 $ 0 0 $ 0 0 $ 0 0 Cum present value of horizon ROPI $ 0 Present value of terminal ROPI NOA Total firm value 0 0 0 Less NNO 0 Firm equity value $ 0 Shares outstanding (millions) Stock price per share $ 0 0 (b) Illinois Tool Works Inc. closed at $144.21 on February 15, 2019, the date the 10-K was filed with the SEC. How does your valuation estimate compare with this closing price?
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. 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 places. Reported Forecast Horizon Period $ millions 2018 2019 2020 2021 2022 Sales $14,030 $14,871 $15,763 $16,710 $17,712 NOPAT NOA Terminal Period $18,066 2,711 2,880 3,053 3,236 3,430 8,989 9,527 10,099 10,705 11,347 3,499 11,574 Answer the following requirements with the following assumptions: Assumptions Terminal period growth rate Discount rate (WACC) 2% 7.35% Common shares outstanding 328.1 million Net nonoperating obligations (NNO) $5,894 million (a) Estimate the value of a share of ITW's common stock using the residual operating income model (ROPI) model as of December 31, 2018. Forecast Horizon ($ millions) Reported 2018 Terminal 2019 2020 2021 2022 Period ROPI (NOPAT-[NOABeg x rw]) Present value of horizon ROPI $ 0 $ 0 0 $ 0 0 $ 0 0 $ 0 0 Cum present value of horizon ROPI $ 0 Present value of terminal ROPI NOA Total firm value 0 0 0 Less NNO 0 Firm equity value $ 0 Shares outstanding (millions) Stock price per share $ 0 0 (b) Illinois Tool Works Inc. closed at $144.21 on February 15, 2019, the date the 10-K was filed with the SEC. How does your valuation estimate compare with this closing price?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![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.
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 places.
Reported Forecast Horizon Period
$ millions 2018 2019 2020 2021 2022
Sales
$14,030 $14,871 $15,763 $16,710 $17,712
NOPAT
NOA
Terminal
Period
$18,066
2,711 2,880 3,053 3,236 3,430
8,989 9,527 10,099 10,705 11,347
3,499
11,574
Answer the following requirements with the following assumptions:
Assumptions
Terminal period growth rate
Discount rate (WACC)
2%
7.35%
Common shares outstanding
328.1 million
Net nonoperating obligations (NNO) $5,894 million
(a) Estimate the value of a share of ITW's common stock using the residual operating income model (ROPI) model as of December 31, 2018.
Forecast Horizon
($ millions)
Reported
2018
Terminal
2019
2020
2021
2022
Period
ROPI (NOPAT-[NOABeg x rw])
Present value of horizon ROPI
$
0 $
0
0 $
0
0 $
0
0 $
0
0
Cum present value of horizon ROPI $
0
Present value of terminal ROPI
NOA
Total firm value
0
0
0
Less NNO
0
Firm equity value
$
0
Shares outstanding (millions)
Stock price per share
$
0
0
(b) Illinois Tool Works Inc. closed at $144.21 on February 15, 2019, the date the 10-K was filed with the SEC. How does your valuation estimate compare with this closing price?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff134842c-6c82-4219-97a4-cc6ce5feff85%2Fc639b152-b847-4644-9d19-b6a8ece7fcfe%2Fmlu33bx_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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.
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 places.
Reported Forecast Horizon Period
$ millions 2018 2019 2020 2021 2022
Sales
$14,030 $14,871 $15,763 $16,710 $17,712
NOPAT
NOA
Terminal
Period
$18,066
2,711 2,880 3,053 3,236 3,430
8,989 9,527 10,099 10,705 11,347
3,499
11,574
Answer the following requirements with the following assumptions:
Assumptions
Terminal period growth rate
Discount rate (WACC)
2%
7.35%
Common shares outstanding
328.1 million
Net nonoperating obligations (NNO) $5,894 million
(a) Estimate the value of a share of ITW's common stock using the residual operating income model (ROPI) model as of December 31, 2018.
Forecast Horizon
($ millions)
Reported
2018
Terminal
2019
2020
2021
2022
Period
ROPI (NOPAT-[NOABeg x rw])
Present value of horizon ROPI
$
0 $
0
0 $
0
0 $
0
0 $
0
0
Cum present value of horizon ROPI $
0
Present value of terminal ROPI
NOA
Total firm value
0
0
0
Less NNO
0
Firm equity value
$
0
Shares outstanding (millions)
Stock price per share
$
0
0
(b) Illinois Tool Works Inc. closed at $144.21 on February 15, 2019, the date the 10-K was filed with the SEC. How does your valuation estimate compare with this closing price?
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