Estimating Share Value Using the DCF Model Following are the income statement and balance sheet for Texas Roadhouse for the year ended December 29, 2015. a. Assume the following forecasts for TXRH's sales, NOPAT, and NOA for 2016 through 2019. 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 $2,096,547 $2,431,995 $2,638,715 $2,863,006 $ NOPAT 102,495 171,917 199,424 216,375 234,766 $ 0 NOA 662,502 768,529 891,494 967,271 1,049,489 $ 0 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 company's 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. Terminal 2019 Period 82,218 $ 10,495 152,548 223,619 0.7629 127,448 Do not use negative signs with any of your answers below. TXRH Reported Forecast Horizon $ thousands 2015 2016 2017 2018 Increase in NOA 106,027 $ 122,965 $ 75,777 $ FCFF (NOPAT - Increase in NOA) 65,890 76,459 140,598 Discount factor (1/(1 + rw)t] 0.93458 0.87344 0.8163 Present value of horizon FCFF 117,329 127,196 125,686 Cum PV of horizon FCFF $ 497,659 Present value of terminal FCFF 2,080,807 Total firm value 3,420,968 NNO 14,680 NCI 7,520 Firm equity value $ 3,248,128 Shares outstanding (thousands) 70,091 Stock price per share $ 46.34 C. TXRH closed at $42.13 on February 26, 2016, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? Ostock prices are a function of many factors. It is impossible to speculate on the reasons for the difference. Our stock price estimate is higher than the TXRH market price, indicating that we believe that the stock is slightly undervalued. Stock prices are a function of expected NOPAT and NOA, as well as the WACC discount rate. Our higher stock price estimate might be due to more optimistic forecasts or a lower discount rate compared to other investors' and analysts' model assumptions. Oour stock price estimate is higher than the TXRH market price, indicating that we believe that the stock is slightly undervalued. Stock prices are a function of expected NOPAT and NOA, as well as the WACC discount rate. Our higher stock price estimate might be due to more pessimistic forecasts or a higher discount rate compared to other investors' and analysts' model assumptions. Oour stock price estimate is slightly higher than the WMT market price, indicating that we believe that WMT stock is slightly overvalued. Stock prices are a function of expected NOPAT and NOA, as well as the WACC discount rate. Our higher stock price estimate might be due to more pessimistic forecasts or a higher discount rate compared to other investors' and analysts' model assumptions. d. If WACC had been 7.5%, what would the valuation estimate have been? What about if WACC has been 6.5%? The valuation estimate at 7.5% would be lower than the estimate calculated in part a because the discount rate increased. In contrast, the valuation estimate at 6.5% would be higher than our estimate. The valuation estimate at 7.5% would be higher than the estimate calculated in part a because the discount rate increased. In contrast, the valuation estimate at 6.5% would be lower than our estimate. The valuation estimate would be the same regardless of the rate used to compute the estimate