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 | |||||
---|---|---|---|---|---|---|
(In millions) | 2011 | 2012 | 2013 | 2014 | 2015 | Terminal Period |
Sales | $ 3,750 | $ 4,500 | $ 5,400 | $ 6,480 | $ 7,776 | $ 7,853 |
NOPAT | 464 | 539 | 654 | 794 | 982 | 960 |
NOA | 1,320 | 1,602 | 1,933 | 2,332 | 2,791 | 2,802 |
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 $(261) 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]) | Answer
| Answer
| Answer
| Answer
| Answer
| |
Discount factor [1 / (1 + rw)t ] | (Round 5 decimal places) | Answer
| Answer
| Answer
| Answer
| |
Present value of horizon ROPI | Answer
| Answer
| Answer
| Answer
| ||
present value of horizon ROPI | Answer
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Present value of terminal ROPI | Answer
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NOA | Answer
| |||||
Total firm value | Answer
| |||||
NNO | Answer
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Firm equity value | Answer
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Shares outstanding (millions) | Answer
| (round one decimal place) | ||||
Stock price per share | Answer
| (round two decimal places) |
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