Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter3: Analysis Of Financial Statements
Section: Chapter Questions
Problem 14P: The Jimenez Corporation’s forecasted 2020 financial statements follow, along with some industry...
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answers to questions b, d & e please
![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
$15,544
$16,010 $16,491 $16,985 $17,495
NOPAT
2,737
2,818
2,902
2,989
3,079
NOA
5,837
6,012
6,193
6,378
6,570
a. Forecast the terminal period values for Sales, NOPAT, and NOA, assuming a 1% terminal period growth rate.
Note: Round answers to the nearest dollar.
Terminal period sales
2$
17,670
Terminal period NOPAT $
3,110 v
Terminal period NOA
24
6,636 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 $5,640 million, and noncontrolling interest (NCI) frombthe balance sheet of $299 million.
Note: Round answers to two decimal places.
$ 57.96
c. Colgate-Palmolive stock closed at $66.70 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.
$ 71.8
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%).
75.93](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff499c6ab-7a4f-4f2e-b899-49854ee78a4a%2F344c8103-2918-4016-98b2-ceb3f40888e1%2F9w9m4ay_processed.png&w=3840&q=75)
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
$15,544
$16,010 $16,491 $16,985 $17,495
NOPAT
2,737
2,818
2,902
2,989
3,079
NOA
5,837
6,012
6,193
6,378
6,570
a. Forecast the terminal period values for Sales, NOPAT, and NOA, assuming a 1% terminal period growth rate.
Note: Round answers to the nearest dollar.
Terminal period sales
2$
17,670
Terminal period NOPAT $
3,110 v
Terminal period NOA
24
6,636 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 $5,640 million, and noncontrolling interest (NCI) frombthe balance sheet of $299 million.
Note: Round answers to two decimal places.
$ 57.96
c. Colgate-Palmolive stock closed at $66.70 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.
$ 71.8
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%).
75.93
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