Answer the following requirements assuming a discount rate (WACC) of 7.8%, a terminal period growth rate of 1%, common shares outstanding of 135.6 million, net nonoperating obligations (NNO) of $(6,129) million, which is negative because Humanas nonoperating assets exceed its nonoperating liabilities, and no noncontrolling interest (NCI) on the balance sheet.

(a) Estimate the value of a share of Humanas common stock using the discounted cash flow (DCF) model as of December 31, 2018.

Instructions:

• Round all answers to the nearest whole number, except for discount factors, shares outstanding (do not round), and stock price per share.

• Round discount factors to 5 decimal places.
• Round stock price per share to two decimal places.
• Use your rounded answers for subsequent calculations.
• Use a negative sign with your NNO answer.

Reported Horizon Period $ millions Sales 2018 2019 2020 2021 2022 $56,912 $57,766 $58,632 $59,512 $60,404 2,492 2,542 2,580 2,619 2,658 4,032 4,097 4,158 4,221 4,284 Terminal Period $61,008 2,684 4,327 NOPAT NOA Reported Forecast Horizon Terminal Period 2018 2019 2020 2021 2022 OX OX 0 X 4,097 X OX OX 0 X 0 X OX OX OX ($ millions) Increase in NOA FCFF (NOPAT - Increase in NOA) Discount factor [1/(1+rw)t] Present value of horizon FCFF Cum present value of horizon FCFF $ Present value of terminal FCFF Total firm value 0 x 2,066 x 0 X 7.568 X 0 X O X NNO $ 0 X Firm equity value Shares outstanding (millions) Stock price per share 0 X $