Question
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
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 | Forecast Horizon Period | Terminal | ||||
|---|---|---|---|---|---|---|
| $ millions | 2018 | 2019 | 2020 | 2021 | 2022 | Period |
| Sales | $57,432 | $58,286 | $59,152 | $60,032 | $60,924 | $61,528 |
| NOPAT | 3,012 | 3,062 | 3,100 | 3,139 | 3,178 | 3,204 |
| NOA | 4,552 | 4,617 | 4,678 | 4,741 | 4,804 | 4,847 |
Answer the following requirements with the following assumptions:
| Assumptions | ||
|---|---|---|
| Terminal period growth rate | 1% | |
| Discount rate (WACC) | 7.8% | |
| Common shares outstanding | 135.60 | million |
| Net nonoperating obligations (NNO) | $(5,609) | million |
| Noncontrolling interest | $0 | million |
NNO is negative because Humanas nonoperating assets exceed its nonoperating liabilities.
(a) Estimate the value of a share of Humanas common stock using the discounted cash flow (DCF) model as of December 31, 2018.
| Reported | Forecast Horizon | Terminal | |||||
|---|---|---|---|---|---|---|---|
| ($ millions) | 2018 | 2019 | 2020 | 2021 | 2022 | Period | |
| Increase in NOA | Answer
| Answer
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| Answer
| Answer
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| FCFF (NOPAT - Increase in NOA) | Answer
| Answer
| Answer
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| Answer
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| Present value of horizon FCFF | Answer
| Answer
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| Answer
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| Cum. present value of horizon FCFF | Answer
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| Present value of terminal FCFF | Answer
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| Total firm value | Answer
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| NNO | Answer
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| Firm equity value | Answer
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| Shares outstanding (millions) | Answer
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| Stock price per share | Answer
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Auditing And Assurance Services An Integrated Approach
Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley
17th Edition
013517614X, 978-0135176146
