Question
In: Accounting
Estimating Share Value Using the DCF Model Following are forecasts of Target Corporation's sales, net operating...
Estimating Share Value Using the DCF
Model
Following are forecasts of Target Corporation's sales, net
operating profit after tax (NOPAT), and net operating assets (NOA)
as of January 30, 2016
| Reported | Horizon Period | Terminal | ||||
|---|---|---|---|---|---|---|
| $ millions | 2016 | 2017 | 2018 | 2019 | 2020 | Period |
| Sales | $73,785 | $75,261 | $76,766 | $78,301 | $79,867 | $80,666 |
| NOPAT | 3,312 | 3,387 | 3,454 | 3,524 | 3,594 | 3,630 |
| NOA | 21,445 | 21,872 | 22,309 | 22,755 | 23,210 |
23,443 |
Answer the following requirements assuming a terminal period
growth rate of 1%, a discount rate (WACC) of 6%, common shares
outstanding of 602 million, and net nonoperating obligations (NNO)
of $8,488 million.
a. Estimate the value of a share of Target common stock using the
discounted cash flow (DCF) model as of January 30,
2016.
Instructions:
-
Round all answers to the nearest whole number, except for discount factors and stock price per share.
- Round discount factors to 5 decimal places.
- Round stock price per share to two decimal places.
- Do not use negative signs with any of your answers.
| Reported | Forecast Horizon | Terminal | |||||
|---|---|---|---|---|---|---|---|
| ($ millions) | 2016 | 2017 | 2018 | 2019 | 2020 | Period | |
| Increase in NOA |
427 |
437 |
446 |
455 |
|||
| FCFF (NOPAT - Increase in NOA) |
2960 |
3017 |
3078 |
3139 |
|||
| Discount factor [1/(1+rw)t] |
0.9434 |
?? |
?? |
?? |
|||
| Present value of horizon FCFF |
2792 |
?? |
?? |
?? |
|||
| Cum. present value of horizon FCFF |
??? |
||||||
| Present value of terminal FCFF |
???? |
||||||
| Total firm value |
???? |
||||||
| NNO |
8488 |
||||||
| Firm equity value |
???? |
||||||
| Shares outstanding (millions) |
602 |
||||||
| Stock price per share |
???? |
||||||
Solutions
Expert Solution
Solution:
Estimate the value of a share of Target common stock using the discounted cash flow (DCF) model as of January 30, 2016:
ekkarill92 answered 1 year agoRelated Solutions
Estimating Share Value Using the DCF Model Following are forecasts of Target Corporation's sales, net operating...
Estimating Share Value Using the DCF Model
Following are forecasts of Target Corporation's sales, net
operating profit after tax (NOPAT), and net operating assets (NOA)
as of January 30, 2016
Reported
Horizon Period
Terminal
$ millions
2016
2017
2018
2019
2020
Period
Sales
$74,340
$75,827
$77,344
$78,891
$80,469
$81,274
NOPAT
3,345
3,412
3,480
3,550
3,621
3,657
NOA
22,302
22,748
23,203
23,667
24,141
24,382
Answer the following requirements assuming a terminal period growth
rate of 1%, a discount rate (WACC) of...
Estimating Share Value Using the DCF Model Following are forecasts of Target Corporation's sales, net operating...
Estimating Share Value Using the DCF
Model
Following are forecasts of Target Corporation's sales, net
operating profit after tax (NOPAT), and net operating assets (NOA)
as of January 30, 2016
Reported
Horizon Period
Terminal
$ millions
2016
2017
2018
2019
2020
Period
Sales
$77,118
$78,660
$80,233
$81,838
$83,475
$84,310
NOPAT
3,470
3,540
3,610
3,683
3,756
3,794
NOA
23,135
23,598
24,070
24,551
25,043
25,293
Answer the following requirements assuming a terminal period growth
rate of 1%, a discount rate (WACC) of...
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 January 31, 2016, for
Wal-Mart Stores, Inc.
Reported
Horizon Period
$ millions
2016
2017
2018
2019
2020
Terminal
Period
Sales
$482,130
$486,951
$491,821
$496,739
$501,706
$506,723
NOPAT
16,634
17,043
17,214
17,386
17,560
17,735
NOA
124,940
126,186
127,448
128,722
130,009
131,309
Answer the following requirements assuming a discount rate (WACC)
of 7%, a terminal period growth...
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...
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...
Estimating Share Value Using the DCF Model Assume following are forecasts of Abercrombie & Fitch's sales,...
Estimating Share Value Using the DCF Model
Assume following are forecasts of Abercrombie & Fitch's sales,
net operating profit after tax (NOPAT), and net operating assets
(NOA) as of January 29, 2011.
Reported
Horizon Period
(In millions)
2011
2012
2013
2014
2015
Terminal Period
Sales
$ 3,750
$ 4,500
$ 5,400
$ 6,480
$ 7,776
$ 7,853
NOPAT
464
539
654
794
982
960
NOA
1,320
1,602
1,933
2,332
2,791
2,802
Answer the following requirements assuming a discount rate (WACC)...
Estimating Share Value Using the DCF Model Assume following are forecasts of Abercrombie & Fitch's sales,...
Estimating Share Value Using the DCF Model
Assume following are forecasts of Abercrombie & Fitch's sales,
net operating profit after tax (NOPAT), and net operating assets
(NOA) as of January 29, 2011.
Reported
Horizon Period
(In millions)
2011
2012
2013
2014
2015
Terminal Period
Sales
$ 3,750
$ 4,500
$ 5,400
$ 6,480
$ 7,776
$ 7,853
NOPAT
464
539
654
794
982
960
NOA
1,320
1,602
1,933
2,332
2,791
2,802
Answer the following requirements assuming a discount rate (WACC)...
Estimating Share Value Using the ROPI Model The following are forecasts of Abercrombie & Fitch's sales,...
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...
Forecasting with the Parsimonious Method and Estimating Share Value Using the DCF Model Following are the...
Forecasting with the Parsimonious Method and Estimating
Share Value Using the DCF Model
Following are the income statement and balance sheet for Cisco
Sytems for the year ended July 30, 2016.
Cisco Sytems
Consolidated Statements of Income
Years Ended December ($ millions)
July 30,
2016
July 25,
2015
Revenue
Product
$37,254
$37,750
Service
11,993
11,411
Total revenue
49,247
49,161
Cost of sales
Product
14,161
15,377
Service
4,126
4,103
Total cost of sales
18,287
19,480
Gross margin
30,960
29,681
Operating expenses...
Forecasting and Estimating Share Value Using the DCF Model Following are the income statement and balance...
Forecasting and Estimating Share Value Using the DCF Model
Following are the income statement and balance sheet for Intel
Corporation.
INTEL CORPORATION
Consolidated Statements of Income
Year Ended (In millions)
Dec. 25, 2010
Dec. 26, 2009
Dec. 27, 2008
Net revenue
$ 44,123
$ 35,127
$ 37,586
Cost of sales
15,132
15,566
16,742
Gross margin
28,991
19,561
20,844
Research and development
6,576
5,653
5,722
Marketing, general and administrative
6,309
7,931
5,452
Restructuring and asset impairment charges
--
231
710
Amortization...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Explain how advances in technology can force a software subsystem to undergo change or run the...
- Discuss whether you agree or disagree on whether you think E-mails need to be managed and...
- b. Do any unions represent employees in Microsoft? Describe which unions are involved. c. Have there been...
- Look up and use each of these Linux commands. (Each command will have two parts) Summarize...
- What was Lincoln 10 percent plan and what problems did it present?
- A cantilever beam 4m long carries a uniform load of 3.5 kN/m over a portion 1.5m...
- Our next optimization comes from using the brilliant Rabin-Karp substring matching algorithm (RK for short), invented...
ADVERTISEMENT