Question
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 | |||||
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(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:
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Round answers to the nearest whole number unless noted otherwise.
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Use your rounded answers for subsequent calculations.
Do not use negative signs with any of your answers.
Reported | Horizon Period | |||||
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(In millions) | 2011 | 2012 | 2013 | 2014 | 2015 | Terminal Period |
ROPI (NOPAT - [NOABeg rw]) |
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Discount factor [1 / (1 + rw)t ] | (Round5 decimal places) |
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Present value of horizon ROPI |
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present value of horizon ROPI |
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Present value of terminal ROPI |
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NOA |
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Total firm value |
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NNO |
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Firm equity value |
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Shares outstanding (millions) |
| (round one decimal place) | ||||
Stock price per share |
| (round two decimal places) |
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