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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

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 464 582 650 818 965 995
NOA 1,359 1,631 1,935 2,311 2,760 2,826

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 $(279) 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 rw])

Discount factor [1 / (1 + rw)t ] (Round5 decimal places)

Present value of horizon ROPI

present value of horizon ROPI

Present value of terminal ROPI

NOA

Total firm value

NNO

Firm equity value

Shares outstanding (millions)

(round one decimal place)
Stock price per share

(round two decimal places)

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