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Posted on Jul 17, 2024

Estimating Share Value Using the DCF Model Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of

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Estimating Share Value Using the DCF Model Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 26, 2011, for Best Buy, Inc. Assume Reported Horizon Period (In millions) 2011 2012 2013 2014 2015 Terminal Period Sales $40,023 $44,577 $49,650 $55,300 $61,592 $62,208 NOPAT 1,448 1,628 1,777 2,009 2.226 2,265 NOA 5,287 5,891 6,545 7,282 8,101 8,214 Answer the following requirements assuming a discount rate (WACC) of 11%, a terminal period growth rate of 1%, common shares outstanding of 410.5 million, net nonoperating obligations (NNO) of $787 million and noncontrolling interest (NCI) on the balance sheet of $690 million. (a) Estimate the value of a share of Best Buy's common stock using the discounted cash flow (DCF) model as of February 26, 2011. Rounding instructions: Round your answers to the nearest whole number except for the discount factors, shares outstanding, and the stock price per share. Round the discount factors to five decimal places, shares outstanding to one decimal place, and the stock price to two decimal places. Use your rounded answers for subsequent calculations. Horizon Period 2013 2014 737 2015 819 Terminal Period 113 654 1,123 1,407 2,152 0.81162 1,272 0.73119 930 0.65873 911 927 Do not use negative signs with any of your answers below. Assume Reported (In millions) 2011 2012 Increase in NOA 604 FCFF (NOPAT - Increase in NOA) 1,024 Discount factor (1/(1+rw)t] (round 5 decimal places) 0.9009 Present value of horizon FCFF 923 Cum present value of horizon FCFF $ 3,691 Present value of terminal FCFF 14,318 x Total firm value 18,008.53 x NNO 787 NCI OX Firm equity value $ 17,221.53 x Shares outstanding (millions) 410.5 (round one decimal place) Stock price per share $ 42 x (round two decimal places) Estimating Share Value Using the DCF Model Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 26, 2011, for Best Buy, Inc. Assume Reported Horizon Period (In millions) 2011 2012 2013 2014 2015 Terminal Period Sales $40,023 $44,577 $49,650 $55,300 $61,592 $62,208 NOPAT 1,448 1,628 1,777 2,009 2.226 2,265 NOA 5,287 5,891 6,545 7,282 8,101 8,214 Answer the following requirements assuming a discount rate (WACC) of 11%, a terminal period growth rate of 1%, common shares outstanding of 410.5 million, net nonoperating obligations (NNO) of $787 million and noncontrolling interest (NCI) on the balance sheet of $690 million. (a) Estimate the value of a share of Best Buy's common stock using the discounted cash flow (DCF) model as of February 26, 2011. Rounding instructions: Round your answers to the nearest whole number except for the discount factors, shares outstanding, and the stock price per share. Round the discount factors to five decimal places, shares outstanding to one decimal place, and the stock price to two decimal places. Use your rounded answers for subsequent calculations. Horizon Period 2013 2014 737 2015 819 Terminal Period 113 654 1,123 1,407 2,152 0.81162 1,272 0.73119 930 0.65873 911 927 Do not use negative signs with any of your answers below. Assume Reported (In millions) 2011 2012 Increase in NOA 604 FCFF (NOPAT - Increase in NOA) 1,024 Discount factor (1/(1+rw)t] (round 5 decimal places) 0.9009 Present value of horizon FCFF 923 Cum present value of horizon FCFF $ 3,691 Present value of terminal FCFF 14,318 x Total firm value 18,008.53 x NNO 787 NCI OX Firm equity value $ 17,221.53 x Shares outstanding (millions) 410.5 (round one decimal place) Stock price per share $ 42 x (round two decimal places)