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 S millions 2016 2017 2018 2019 Period 2020 Sales $74,673 $76,166 $77,689 $79,243 $80,828 $81,636 NOPAT 3,360 3,427 3,496 3,566 3,637 3,674 NOA 22,402 22,850 23,307 23,773 24,248 24,491 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. 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 (S millions) 2016 Period 2017 2018 2019 2020 Increase in NOA 448 v 457 v 466 v 475 v 243 v FCFF (NOPAT - Increase in NOA) 2,979 v 3,039 3,100 v 3,162 v 3,431 v v Discount factor [1/(1+rw)t] 0.9434 v 0.89 v 0.83962 v 0.79209 v Present value of horizon FCFF 2.810 v 2,705 v 2,603 v 2,505 v Cum. present value of horizon FCFF $ 10,623 v Present value of terminal FCFF 0 x Total firm value 64,463 x NNO Firm equity value %$4 0 x Shares outstanding (millions) 602 v Stock price per share %$4 93 x Check
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 S millions 2016 2017 2018 2019 Period 2020 Sales $74,673 $76,166 $77,689 $79,243 $80,828 $81,636 NOPAT 3,360 3,427 3,496 3,566 3,637 3,674 NOA 22,402 22,850 23,307 23,773 24,248 24,491 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. 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 (S millions) 2016 Period 2017 2018 2019 2020 Increase in NOA 448 v 457 v 466 v 475 v 243 v FCFF (NOPAT - Increase in NOA) 2,979 v 3,039 3,100 v 3,162 v 3,431 v v Discount factor [1/(1+rw)t] 0.9434 v 0.89 v 0.83962 v 0.79209 v Present value of horizon FCFF 2.810 v 2,705 v 2,603 v 2,505 v Cum. present value of horizon FCFF $ 10,623 v Present value of terminal FCFF 0 x Total firm value 64,463 x NNO Firm equity value %$4 0 x Shares outstanding (millions) 602 v Stock price per share %$4 93 x Check
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![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
$74,673 $76,166 $77,689 $79,243 $80,828
$81,636
NOPAT
3,360
3,427
3,496
3,566
3,637
3,674
NOA
22,402 22,850 23,307 23,773 24,248
24,491
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 $8,488 million.
Estimate the value of a share of Target common stock using the discounted cash flow (DCF) model as of January 30, 2016.
Instructions:
• Round all answers to the nearest whole number, except for discount factors and stock price per share.
• Round discount factors to 5 decimal places.
• Round stock price per share to two decimal places.
• Do not use negative signs with any of your answers.
Reported
Forecast Horizon
Terminal
($ millions)
2016
2017
2018
2019
2020
Period
Increase in NOA
448
457
466 v
475 V
243 v
FCFF (NOPAT - Increase in NOA)
2,979 v
3,039 v
3,100 v
3,162 v
3,431 v
Discount factor [1/(1+rw)t]
0.9434 v
0.89 V
0.83962 v
0.79209 v
Present value of horizon FCFF
2,810 v
2,705 v
2,603 v
2,505 v
Cum. present value of horizon FCFF $
10,623
Present value of terminal FCFF
0 x
Total firm value
64,463 x
NNO
0 x
Firm equity value
2$
0 x
Shares outstanding (millions)
602 v
Stock price per share
2$
93 x
Check](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcb80a5a3-fc38-4f85-bd23-aea358ee9bcd%2Fd9c0fd8d-57bd-46fd-8a6e-ecdc52fda550%2Fckvfu98_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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
$74,673 $76,166 $77,689 $79,243 $80,828
$81,636
NOPAT
3,360
3,427
3,496
3,566
3,637
3,674
NOA
22,402 22,850 23,307 23,773 24,248
24,491
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 $8,488 million.
Estimate the value of a share of Target common stock using the discounted cash flow (DCF) model as of January 30, 2016.
Instructions:
• Round all answers to the nearest whole number, except for discount factors and stock price per share.
• Round discount factors to 5 decimal places.
• Round stock price per share to two decimal places.
• Do not use negative signs with any of your answers.
Reported
Forecast Horizon
Terminal
($ millions)
2016
2017
2018
2019
2020
Period
Increase in NOA
448
457
466 v
475 V
243 v
FCFF (NOPAT - Increase in NOA)
2,979 v
3,039 v
3,100 v
3,162 v
3,431 v
Discount factor [1/(1+rw)t]
0.9434 v
0.89 V
0.83962 v
0.79209 v
Present value of horizon FCFF
2,810 v
2,705 v
2,603 v
2,505 v
Cum. present value of horizon FCFF $
10,623
Present value of terminal FCFF
0 x
Total firm value
64,463 x
NNO
0 x
Firm equity value
2$
0 x
Shares outstanding (millions)
602 v
Stock price per share
2$
93 x
Check
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