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Estimating Share Value Using the DCF Model Following are forecasts of sales, net operating profit after...

Estimating Share Value Using the DCF Model

Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 26, 2011, for Best Buy, Inc.

Assume
Reported
Horizon Period
(In millions) 2011 2012 2013 2014 2015 Terminal Period
Sales $50,272 $52,786 $55,425 $58,196 $61,106 $61,717
NOPAT 1,389 1,584 1,663 1,746 1,833 1,852
NOA 7,876 8,248 8,660 9,093 9,548 9,643


Answer the following requirements assuming a discount rate (WACC) of 11%, a terminal period growth rate of 1%, common shares outstanding of 392.6 million, net nonoperating obligations (NNO) of $1,274 million and noncontrolling interest (NCI) on the balance sheet of $690 million.

(a) Estimate the value of a share of Best Buy's common stock using the discounted cash flow (DCF) model as of February 26, 2011.

Rounding instructions:

Round your answers to the nearest whole number except for the discount factors, shares outstanding, and the stock price per share.

Round the discount factors to five decimal places, shares outstanding to one decimal place, and the stock price to two decimal places.

Use your rounded answers for subsequent calculations.

Do not use negative signs with any of your answers below.

Assume Reported Horizon Period
(In millions) 2011 2012 2013 2014 2015 Terminal Period
Increase in NOA Answer Answer Answer Answer Answer
FCFF (NOPAT - Increase in NOA) Answer Answer Answer Answer Answer
Discount factor [1/(1+rw)t] (round 5
decimal places)
Answer Answer Answer Answer
Present value of horizon FCFF Answer Answer Answer Answer
present value of horizon FCFF $Answer
Present value of terminal FCFF Answer
Total firm value Answer
NNO Answer
NCI Answer
Firm equity value $Answer
Shares outstanding (millions) Answer (round one
decimal place)
Stock price per share $ Answer (round two
decimal places)


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