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

Estimating Share Value Using the ROPI Model
Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31,2018, for Humana.
Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places.
Reported Horizon period Terminal
$ millions 20182019202020212022 Period
Sales $56,752 $57,606 $58,472 $59,352 $60,244 $60,848
NOPAT 2,4922,5422,5802,6192,6582,684
NOA 3,8723,9373,9984,0614,1244,167
Answer the following requirements with the following assumptions:
Assumptions
Terminal period growth rate 1%
Discount rate (WACC)7.8%
Common shares outstanding 135.6 million
Net nonoperating obligations (NNO) $(6,289) million
NNO is negative because Humanas nonoperating assets exceed its nonoperating liabilities.
(a) Estimate the value of a share of common stock using the residual operating income (ROPI) model as of December 31,2018.
Reported Forecast Horizon Terminal
($ millions)20182019202020212022 Period
ROPI (NOPAT -[NOABeg x rw]) Answer 1
Answer 2
Answer 3
Answer 4
Answer 5
Present value of horizon ROPI Answer 6
Answer 7
Answer 8
Answer 9
Cum present value of horizon ROPI Answer 10
Present value of terminal ROPI Answer 11
NOA Answer 12
Total firm value Answer 13
Less NNO Answer 14
Firm equity value Answer 15
Shares outstanding (millions) Answer 16
Stock price per share Answer 17
(b) Humana (HUM) stock closed at $307.56 on February 21,2019, the date the 10-K was filed with the SEC. How does your valuation estimate compare with this closing price?
Answer 18

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