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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 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 Answer Answer Answer Answer Answer
FCFF (NOPAT - Increase in NOA) Answer Answer Answer Answer Answer
Discount factor [1/(1+rw)t] Answer Answer Answer Answer
Present value of horizon FCFF Answer Answer Answer Answer
Cum. present value of horizon FCFF Answer
Present value of terminal FCFF Answer
Total firm value Answer
NNO Answer
Firm equity value Answer
Shares outstanding (millions) Answer
Stock price per share Answer

Solutions

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