Compute CVS's net operating assets (NOA) as of December 31, 2012.

2012 NOA = $Answer

Compute net operating profit after tax (NOPAT) for fiscal year ended December 31, 2012, assuming a federal and state statutory tax rate of 37%.(Round your answer to the nearest whole number.) 2012 NOPAT = $Answer

Forecast CVS's sales, NOPAT, and NOA for 2013 through 2016 using the following assumptions:

Estimate the value of a share of CVS common stock using the discounted cash flow (DCF) model as of December 31, 2012; assume a discount rate (WACC) of 7%, common shares outstanding of 1,231 million, and net nonoperating obligations (NNO) of $8,448 million. Use your rounded answers for subsequent calculations.

Module 13 homework Forecasting and Estimating Share Value Using the DCF Model Assume the following are the income statement and balance sheet for CVS Caremark. (In millions) Net revenues Cost of revenues CVS CAREMARK INC. Consolidated Statements of Income Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2010 $ 123,133 $ 107,100 $ 95,778 100,627 86,539 75,559 Gross profit Operating expenses Operating profit Interest expense, net Loss on early extinguishment of debt Income before income tax provision Income tax provision Income from continuing operations Income (loss) from discontinued operations, net of tax Net income Net loss attributable to noncontrolling interest Net income attributable to CVS Caremark 22,506 15,278 20,561 14,231 20,219 14,082 7,228 557 348 6,330 584 6,137 536 6,323 2,441 5,746 2,258 5,601 2,179 3,882 (7) 3,488 (31) 3,422 2 3,875 2 3,457 4 3,424 3 $ 3,877 $ 3,461 $ 3,427 CVS CAREMARK INC. Balance Sheets (In millions, except per share amounts) Assets Cash and cash equivalents Shortterm investments Accounts receivables, net Inventories Deferred tax assets Other current assets Total current assets Propertyand equipment, net Goodwill Intangible assets, net Other assets Total assets Liabilities Accounts payable Claims and discounts payable Accrued expenses Shortterm debt Current portion of longterm debt Total current liabilities Longterm debt Deferred income taxes Other longterm liabilities Redeemable noncontrolling interest Shareholders' equity: Preferred stock, par value $0.01:0.1 shares authorized; none issued or outstanding Common stock, $0.01 par value, 3,200 shares authorized; 1,667 issued and 1,231 shares outstanding at December 31, 2012 and 1,640 shares issued and 1,298 shares outstanding at December 31, 2011 Treasury stock at cost: 435 shares at December 31, 2012 and 340 shares at December 31, 2011 Shares held in trust: 1 share at December 31, 2012 and 2 shares at December 31, 2011 Capital surplus Retained earnings Accumulated other comprehensive loss Total shareholders' equity Total liabilities and shareholders' equity Dec. 31, 2012 Dec. 31, 2011 $ 1,375 5 6,473 10,759 663 577 $ 1,413 5 6,047 10,046 503 580 19,852 8,632 26,395 9,753 1,280 18,594 8,467 26,458 9,869 1,155 $65,912 $ 5,070 3,974 4,051 690 5 $64,543 $ 4,370 3,487 3,293 750 56 13,790 9,133 3,784 1,501 11,956 9,208 3,853 1,445 30 17 16 (16,270) (11,953) (31) (56) 29,120 25,049 (181) 37,704 28,126 22,090 (172) 38,051 $65,912 $64,543 (a) Compute CVS's net operating assets (NOA) as of December 31, 2012. 2012 NOA = $Answer b) Compute net operating profit after tax (NOPAT) for fiscal year ended December 31, 2012, assuming a federal and state statutory tax rate of 37%.(Round your answer to the nearest whole number.) 2012 NOPAT = $Answer c) Forecast CVS's sales, NOPAT, and NOA for 2013 through 2016 using the following assumptions: Sales growth Net operating profit margin (NOPM) Net operating asset turnover (NOAT) at fiscal yearend 10% 3.6% 2.67 Forecast the terminal period value assuming a 1% terminal period growth and using the NOPM and NOAT assumptions above. Forecast Horizon CVS Reported ($ milli 2012 ons) Sales (rou nded $Answer two deci mal place s) Sales (rou nded $Answer near est whol e num ber) NO Answer PAT 2013 Est. 2014 Est. Terminal 2015 Est. 2016 Est. Period $Answer $Answer $Answer $Answer $Answer $Answer $Answer $Answer $Answer $Answer Answer Answer Answer Answer Answer Forecast Horizon CVS Reported ($ milli 2012 ons) (rou nded near est whol e num ber)* NOA (rou nded Answer near est whol e num ber)* 2013 Est. 2014 Est. 2015 Est. 2016 Est. Period Answer Terminal Answer Answer Answer Answer * Use sales rounded to nearest whole number for this calculation. (d) Estimate the value of a share of CVS common stock using the discounted cash flow (DCF) model as of December 31, 2012; assume a discount rate (WACC) of 7%, common shares outstanding of 1,231 million, and net nonoperating obligations (NNO) of $8,448 million. Use your rounded answers for subsequent calculations. CVS ($ million s) DCF Model Increas e in NOA (rounde d to nearest whole number ) FCFF (NOPA Forecast Horizon Reported 2012 2013 Est. 2014 Est. Terminal 2015 Est. 2016 Est. Period Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer CVS Forecast Horizon Reported ($ million 2012 2013 Est. s) T Increas e in NOA) Discou nt Answer factor (rounde d to 5 decimal places) Present value of horizon FCFF Answer (rounde d to nearest whole number ) Cum present (rounded to $Answer value nearest of whole number) horizon FCFF Present Answer value (rounded to of nearest termina whole number) l FCFF Total Answer (rounded to firm nearest whole number) value Answer (rounded to Less nearest NNO whole number) Firm equity value $Answer Shares Answer outstan (rounded to nearest whole number) (rounded to nearest 2014 Est. Terminal 2015 Est. 2016 Est. Answer Answer Period Answer Answer Answer Answer CVS Reported ($ million 2012 2013 Est. s) ding (millio whole number) ns) Stock $Answer price (rounded to two per decimal places) share Forecast Horizon 2014 Est. Terminal 2015 Est. 2016 Est. Period 2) Forecasting and Estimating Share Value Using the DCF Model Following are the income statement and balance sheet for Intel Corporation. INTEL CORPORATION Consolidated Statements of Income Years Ended December (In Millions, Except Per Share Amounts) Net revenue 2012 2011 2010 $ 53,341 $ 53,999 $ 46,623 20,190 20,242 15,132 Cost of sales Gross margin Research and development Marketing, general and adminstrative 33,151 10,148 8,057 308 33,757 8,350 7,670 260 28,491 6,576 6,309 18 18,513 16,280 12,903 Operating income 14,638 Gains (losses) on other equity investments, net 141 94 Interest and other, net 17,477 112 192 15,588 348 109 Income before taxes 17,781 4,839 16,045 4,581 Amortization of acquisitionrelated intangibles Operating expenses Provisions for taxes 14,873 3,868 $ 11,005 $ 12,942 $ 11,464 Net income INTEL CORPORATION Consolidated Balance Sheets As of YearEnded (In millions, except par value) Assets Current assets Cash and cash equivalents Shortterm investments Trading assets Accounts receivables, net Inventories Deferred tax assets Other current assets Total current assets Property, plant and equipment, net Marketable equity securities Other longterm investments** Dec. 29, 2012 Dec. 31, 2011 $ 8,478 3,999 5,685 3,833 4,734 2,117 2,512 $ 5,065 5,181 4,591 3,650 4,096 1,700 1,589 31,358 25,872 27,983 4,424 493 23,627 562 889 INTEL CORPORATION Consolidated Balance Sheets As of YearEnded (In millions, except par value) Goodwill Identified intangible assets Other longterm assets Total assets Liabilities Currnet liabilities Shortterm debt Accounts payable Accrued compensation and benefits Accrued advertising Deferred income Other accrued liabilities Total current liabilities Dec. 29, Dec. 31, 2012 2011 9,710 9,254 6,235 6,267 4,148 4,648 $84,351 $312 3,023 2,972 1,015 1,932 3,644 $71,119 $247 2,956 2,948 1,134 1,929 2,814 12,898 12,028 Longterm debt 13,136 Longterm deferred tax liabilities 3,412 Other longterm liabilities 3,702 Stockholders' equity Preferred stock, $0.001 par value, 50 shares authorized; none issued Common stock, $0.001 par value, 10,000 shares authorized; 4,944 issued and 19,464 outstanding (5,000 issued and outstanding in 2011) and capital in excess of par value 7,084 2,617 3,479 Accumulated other comprehensive income (loss) (399) (781) 32,138 29,656 51,203 45,911 $ 84,351 $ 71,119 Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 17,036 (a) Compute Intel's net operating assets (NOA) for year-end 2012. 2012 NOA = b) Compute net operating profit after tax (NOPAT) for 2012, assuming a federal and state statutory tax rate of 37%.(Round your answer to the nearest whole number.) 2012 NOPAT = c) Forecast Intel's sales, NOPAT, and NOA for years 2013 through 2016 using the following assumptions: Sales growth Net operating profit margin (NOPM) Net operating asset turnover (NOAT) at yearend 10% 20.4% 1.27 Forecast the terminal period value using a terminal period growth of: 1% and the NOPM and NOAT assumptions above. INTC ($ millions) Sales (rounded two decimal places) 2012 Forecast Horizon Reported Terminal 2013 Est. 2014 Est. 2015 Est. 2016 Est. Period Sales (rounded nearest whole number) NOPAT (rounded nearest whole number)* NOA (rounded nearest whole number)* Use sales rounded to nearest whole number for this calculation. d) Estimate the value of a share of Intel common stock using the discounted cash flow (DCF) model as of December 29, 2012; assume a discount rate (WACC) of 11%, common shares outstanding of 4,944 million, and net nonoperating obligations (NNO) of $(9,138) million (NNO is negative which means that Intel has net nonoperating investments). Use your rounded answers for subsequent calculations. INTC ($ millions) Forecast Horizon Reported 2012 DCF Model Increase in NOA (rounded to nearest whole number) 2013 Est. 2014 Est. Terminal 2015 Est. 2016 Est. Period FCFF (NOPAT - Increase in NOA) Discount factor Present value of horizon FCFF Cum. present value of horizon FCFF Present value of terminal FCFF Total firm value Plus negative NNO Firm equity value Shares outstanding (millions) Stock price per share