Estimating Share Value Using the ROPI Model Following are forecasts of Home Depot’s sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 31, 2016.

$ millions Reported 2016 Horizon Period Terminal 2017 2018 2019 2020 Period Sales. . . . . . . . . . . . . . . . . $88,519 $97,371 $107,108 $117,819 $129,601 $134,785 NOPAT . . . . . . . . . . . . . . . 7,483 8,277 9,104 10,015 11,016 11,457 NOA . . . . . . . . . . . . . . . . . 25,415 27,956 30,752 33,827 37,210 38,698

a. Estimate the value of a share of Home Depot common stock using the residual operating income

(ROPI) model as of January 31, 2016. Assume a weighted average cost of capital of 9%, common shares outstanding of 1,252 million, and net non-operating obligations of $19,099 million in 2016.

Impute the terminal growth rate from the sales information provided above.

b. Home Depot stock closed at $130.46 on March 24, 2016, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? What do you believe are some reasons for the difference?