Question

Estimating Share Value Using the ROPI Model The following are forecasts of Abercrombie & Fitch's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 29, 2011. Refer to the information in the table to answer the following requirements. Reported Horizon Period (In millions) 2011 2012 2013 2014 2015 Terminal Period Sales $ 3,469 $ 3,989 $ 4,587 $ 5,275 $ 6,066 $ 6,187 NOPAT 152 319 367 422 485 495 NOA 1,032 1,173 1,349 1,551 1,784 1,820 Answer the following requirements assuming a discount rate (WACC) of 10%, a terminal period growth rate of 2%, common shares outstanding of 87.2 million, and net nonoperating obligations (NNO) of $(858) million. (Negative NNO reflects net nonoperating assests such as investments rather than net obligations) (a) Estimate the value of a share of Abercrombie & Fitch common stock using the residual operating income (ROPI) model as of January 29, 2011. Rounding instructions: Round answers to the nearest whole number unless noted otherwise. Use your rounded answers for subsequent calculations. Do not use negative signs with any of your answers. Reported Horizon Period (In millions) 2011 2012 2013 2014 2015 Terminal Period ROPI (NOPAT - [NOABeg × rw]) Answer 216 Answer 250 Answer 287 Answer 330 Answer 317 Discount factor [1 / (1 + rw)t ] (round 5 decimal places) Answer 0.90909 Answer 0.82645 Answer 0.75131 Answer 0.68301 Present value of horizon ROPI Answer 196 Answer 206 Answer 216 Answer 225 Cum present value of horizon ROPI Answer 842 Present value of terminal ROPI Answer 2,703 NOA Answer 1,032 Total firm value Answer 4,577 NNO Answer 858 Firm equity value Answer 3,719 Shares outstanding (millions) Answer 872 (round one decimal place) Stock price per share Answer 42.65 (round two d

Answer 1