For this question pertaining to estimating share value using the DCF model, please let me know where I went wrong with my answers. Please solve the problem in its entirity and show your steps to your calculations.
QUESTION 1 Partially correct 0.85 points out of 1.00 Fleg question Estimating Share Value Using the DCF Model Following are forecasts of Abercrombie & Fitch's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 2, 2013. Reported Horizon Period In millions) 2013 2014 2015 2016 2017 Terminal Period $4,511 $4,872 55,262 S5,683 $6,138 242 261 282 305 32 ,446 1,562 1,687 1,821 1,967 Sales NOPAT NOA $6,261 336 2,007 Answer the following requirements assuming a discount rate (WACC) of 10%, a terminal period growth rate of 2%, common shares outstanding of 784 million, and net nonoperating obligations (NNO) of $(372) 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 discounted cash flow (DCF) model as of February 2, 2013. 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) 2014 2015 2016 2017 Terminal Period 40 296 2013 Increase in NOA 134 116 145 (Round 5 decimal places 0.90909 132 125 157 0.82645 130 146 FCFF(NOPAT-Increase in NOA) 183 Discount focor [1w 0.75131 .6301 Present value of horizon FCFF 128 125 Cum present value of horizon FCFF 515 Present value of terminal FCFF 1,875X Total firm value 2,390 X NNO 372 Firm equity value 2,762x Round one decimal place) Shares outstanding (millions) 78.4 Round two decimal places) Scock price per share 35.23 (b) Assume Abercrombie & Fitch (ANF) stock closed at $45.46 on April 2, 2013, the date the 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? What do you believe are some reasons for the difference? Stock prices are a function of many factors. It is impossible to speculate on the reasons for the difference Our stock price estimate is lower than the ANF market price, indicating that we believe that ANF stock is overvalued. Stock prices are a function of expected NOPAT and NOA, as well as the WACC discount rate. Our lower stock price estimate might be due to more pessimistic forecasts or a higher discount rate compared to other investors' and analysts' model assumptions. ?our stock price estimate is lower than the ANF market price, indicating that we believe that ANF stock is overvalued. Stock prices are a function of expected NOPAT and NOA, as well as the WACC discount rate. Our lower stock price estimate might be due to more optimistic forecasts or a lower discount rate compared to other investors' and analysts' model assumptions. Our stock price estimate is lower than the ANF market price, indicating that we believe that ANF stock is undervalued. Stock prices are a function
