Estimating share value using ropi

Question 1 Partially correct Mark 0.23 out of 5.00 Estimating Share Value Using the ROPI Model Assume following are forecasts of Abercrombie & Fitch's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 29, 2011. Refer to the information in the table to answer the following requirements. Reported Horizon Period (In millions) 2011 2012 2013 2014 2015 Terminal Period Sales $ 3,750 $ 4,500 $ 5,400 $ 6,480 $ 7,776 $ 7,853 NOPAT 464 539 654 794 982 960 NOA 1,320 1,602 1,933 2,332 2,791 2,802 Answer the following requirements assuming a discount rate (WACC) of 13.3%, a terminal period growth rate of 1%, common shares outstanding of 86.2 million, and net nonoperating obligations (NNO) of $(261) million (negative NNO reflects net nonoperating assets such as investments rather than net obligations). (a) Estimate the value of a share of Abercrombie & Fitch common stock using the residual operating income (ROPI) model as of January 29, 2011. Rounding instructions: . Round answers to the nearest whole number unless noted otherwise. Use your rounded answers for subsequent calculations. Do not use negative signs with any of your answers. Reported Horizon Period (In millions) 2011 2012 2013 2014 2015 Terminal Period ROPI (NOPAT - [NOABeg x rw]) 0 X 0 x 0 % 0 % 0 X Discount factor [1 / (1 + rw)t ] (Round 5 decimal places) 0.78 x 0 x O X Present value of horizon ROPI 0 X 0 x O X 0 X Cum present value of horizon ROPI $ 411 x Present value of terminal ROPI 0 x NOA 0 x Total firm value 0 x NNO 0 x Firm equity value 0 x Shares outstanding (millions) 0 * (round one decimal place) Stock price per share 0 * (round two decimal places) (b) Assume Abercrombie & Fitch (ANF) stock closed at $77.56 on March 2, 2011. How does your valuation estimate compare with this closing price? What do you believe are some reasons for the difference