Estimating Share Value Using the DCF Model

Following are forecasted sales, NOPAT, and NOA for Texas Roadhouse for 2016 through 2019.

a. Forecast the terminal period values assuming a 1% terminal period growth rate for all three model inputs: Sales, NOPAT, and NOA.

Round your answers to the nearest dollar.

	Reported	Forecast Horizon				Terminal
$ thousands	2015	2016	2017	2018	2019	Period
Sales	$1,807,368	$2,060,400	$2,348,855	$2,513,275	$2,689,205	Answer
NOPAT	102,495	168,953	192,606	206,089	220,515	Answer
NOA	662,502	755,279	861,017	921,288	985,779	Answer

b. Estimate the value of a share of TXRH common stock using the discounted cash flow (DCF) model as of December 29, 2015; assume a discount rate (WACC) of 7%, common shares outstanding of 70,091 thousand, net nonoperating obligations (NNO) of $(14,680) thousand, and noncontrolling interest (NCI) from the balance sheet of $7,520 thousand. Note that NNO is negative because the companys cash exceeds its nonoperating liabilities.

Rounding instructions:

• Use rounded answers for subsequent computations.

• Round answers to the nearest whole number unless otherwise noted.
• Round discount factor to 5 decimal places and stock price per share to two decimal places.
• Use a negative sign with your negative NNO answer. Otherwise, do not use negative signs with your answers.

TXRH				Forecast Horizon		Terminal
$ thousands		2016	2017	2018	2019	Period
Increase in NOA		Answer	Answer	Answer	Answer	Answer
FCFF (NOPAT - Increase in NOA)		Answer	Answer	Answer	Answer	Answer
Discount factor [1 / (1 + rw)t ]		Answer	Answer	Answer	Answer
Present value of horizon FCFF		Answer	Answer	Answer	Answer
Com PV of horizon FCFF	Answer
Present value of terminal FCFF	Answer
Total firm value	Answer
NNO	Answer
NCI	Answer
Firm equity value	Answer
Shares outstanding (thousands)	Answer
Stock price per share	Answer