$($a$)$ To estimate free cash flows $($FCF$)$ for years $1$ through $4,$ fill in the following table.

$\backslash$table$[[$Year $0,$Year $1,$Year $2,$Year $3,$Year $4]]$

Sales

$\backslash$table$[[$Depreciation$],[$EBIT$],[$Taxes$],[$Accounts Receivable$],[$ Accounts Receivable$],[$Accounts Payable$],[$ Accounts Payable$],[$Inventory$],[$ Inventory$],[$CapEx$],[$FCF$]]$

Making Sense of Stock Price

As of March $22,2024,$ Target Corporation $($stock ticker: TGT$)\text{'}$s stock price is $$169\mathrm{.}12$ per share.

Nrarget Corporation $($TGT$)$ Real Time Pice $-$ usD

$169\mathrm{.}12-1\mathrm{.}05(-0\mathrm{.}62\%)$

As of $12\mathrm{.}46$ PM EDT. Market Open.

$\backslash$table$[[$Sales$,$Year $0,$Year $1,$Year $2,$Year $3,$Year $4],[,,,,],[$Depreciation$,,,,,],[$EBIT$,,,,,],[$Taxes$,,,,,],[$Accounts Receivable,,,,,$],[$ Accounts Receivable,,,,,$],[$Accounts Payable,,,,,$],[$ Accounts Payable,,,,,$],[$Inventory$,,,,,],[$ Inventory,,,,,$],[$CapEx$,,,,,],[$FCF$,,,,,]]$

$($b$)$ After year $4($year $2027),$ both sales revenue and free cash flows are expected to grow at a long$-$run rate of $3\mathrm{.}0\%$ every year forever. The firm$-$specific discount rate is $8\%.$ What is the enterprise value today?

Cash Flow approach.

$($c$)$ In current balance sheet, the firm has $$3,805$ million in cash, $$26,834$ million in debt, and $461$ million shares outstanding. What is the share price?

$($d$)$ Based on your estimate in $($c$),$ do you conclude that the current market price of $$169\mathrm{.}12$ is fair? Or$,$ is the stock over$/$undervalued$?$

MGMT$326$ Financial Management $-$ Spring $2024$

Following is Target's sales forecast for the next four years along with the current year of $2024.$

$\backslash$table$[[$Year$,\backslash$table$[[2024],[($current year$)]],\backslash$table$[[2025],[($year $1)]],\backslash$table$[[2026],[($year $2)]],\backslash$table$[[2027],[($year $3)]],\backslash$table$[[2028],[($year $4)]]],[\backslash$table$[[$Sales$],[$ million$)]],107,700,111,170,115,870,120,300,124,710]]$

In addition, based on the company's past profitability and investment needs, we assume the followings:

EBIT is $6\mathrm{.}98\%$ of sales.

Tax rate is $21\%$ of EBIT.

Accounts Receivable is expected to be $6\mathrm{.}76\%$ of sales.

Accounts Payable is expected to be $11\mathrm{.}28\%$ of sales.

Inventory is expected to be $11\mathrm{.}48\%$ of sales.

Capital expenditure is expected to be $4\mathrm{.}60\%$ of sales.

$($e$)$ Suppose that the long$-$run growth rate in part $($b$)$ is $4\mathrm{.}5\%$ rather than $3\mathrm{.}0\%$ per year. With this growth rate, how much would a share be worth? $($Other than the growth rate, there is no change in the discount rate and balance$-$sheet items$).$