Estimating Share Value Using the DCF Model

Following are forecasted sales, NOPAT, and NOA for Colgate-Palmolive Company for 2019 through 2022.

Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places.

a. Forecast the terminal period values assuming the following terminal period growth rate.

Assumption
Terminal period growth rate	1%

		Reported	Forecast Horizon Period				Terminal
	$ millions	2018	2019	2020	2021	2022	Period
	Sales	$15,544	$16,010	$16,491	$16,985	$17,495	Answer
	NOPAT	2,737	2,818	2,902	2,989	3,079	Answer
	NOA	5,837	6,012	6,193	6,378	6,570	Answer

b. Estimate the value of a share of Colgate-Palmolive common stock using the discounted cash flow (DCF) model using the following assumptions and the information above.

Assumptions
Discount rate (WACC)	5.70%
Common shares outstanding	863.0	million
Net nonoperating obligations (NNO)	$5,640	million
Noncontrolling interest (NCI)	$299	million

		Reported			Forecast Horizon		Terminal
	($ millions)	2018	2019	2020	2021	2022	Period
	Increase in NOA		Answer	Answer	Answer	Answer	Answer
	FCFF (NOPAT - Increase in NOA)		Answer	Answer	Answer	Answer	Answer
	Present value of horizon FCFF		Answer	Answer	Answer	Answer
	Cum. present value of horizon FCFF	Answer
	Present value of terminal FCFF	Answer
	Total firm value	Answer
	Less (plus) NNO	Answer
	Less NCI	Answer
	Firm equity value	Answer
	Shares outstanding (millions)	Answer
	Stock price per share	Answer

c. Colgate-Palmolives stock closed at $66.70 on February 21, 2019, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price?

AnswerHigherLower

d. The forecasts you completed assumed a terminal growth rate of 1%. What if the terminal rate had been 2%. What would your estimated stock price have been?

	Value
	Answer

e. What would WACC have to be to warrant the actual stock price on February 21, 2019?

	WACC
	Answer