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Estimating Share Value Using the DCF Model Following are forecasts of Target Corporation's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 30, 2016 Reported Horizon Period Terminal $ millions 2016 2017 2018 2019 2020 Period Sales $73,785 $75,261 $76,766 $78,301 $79,867 $80,666 NOPAT 3,312 3,387 3,454 3,524 3,594 3,630 NOA 21,445 21,872 22,309 22,755 23,210 23,443 Answer the following requirements assuming a terminal period growth rate of 1%, a discount rate (WACC) of 6%, common shares outstanding of 602 million, and net nonoperating obligations (NNO) of $8,488 million. a. Estimate the value of a share of Target common stock using the discounted cash flow (DCF) model as of January 30, 2016. Instructions: Round all answers to the nearest whole number, except for discount factors and stock price per share. Round discount factors to 5 decimal places. Round stock price per share to two decimal places. Do not use negative signs with any of your answers. Forecast Horizon 2018 2019 Terminal Period 2017 2020 427 437 446 455 233 3,017 3,397 2,960 0.9434 3,078 0.83962 0.89 3,139 0.79209 2,486.37 2,792.46 2,685.13 2,584.35 Reported ($ millions) 2016 Increase in NOA FCFF (NOPAT - Increase in NOA) Discount factor [1/(1+rw)t] Present value of horizon FCFF Cum. present value of horizon FCFF $ 10,548 Present value of terminal FCFF 53,815 Total firm value 64,363 NNO 8,488 Firm equity value $ 55,875 Shares outstanding (millions) 602 Stock price per share $ 92.82 Estimating Share Value Using the DCF Model Following are forecasts of Target Corporation's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 30, 2016 Reported Horizon Period Terminal $ millions 2016 2017 2018 2019 2020 Period Sales $73,785 $75,261 $76,766 $78,301 $79,867 $80,666 NOPAT 3,312 3,387 3,454 3,524 3,594 3,630 NOA 21,445 21,872 22,309 22,755 23,210 23,443 Answer the following requirements assuming a terminal period growth rate of 1%, a discount rate (WACC) of 6%, common shares outstanding of 602 million, and net nonoperating obligations (NNO) of $8,488 million. a. Estimate the value of a share of Target common stock using the discounted cash flow (DCF) model as of January 30, 2016. Instructions: Round all answers to the nearest whole number, except for discount factors and stock price per share. Round discount factors to 5 decimal places. Round stock price per share to two decimal places. Do not use negative signs with any of your answers. Forecast Horizon 2018 2019 Terminal Period 2017 2020 427 437 446 455 233 3,017 3,397 2,960 0.9434 3,078 0.83962 0.89 3,139 0.79209 2,486.37 2,792.46 2,685.13 2,584.35 Reported ($ millions) 2016 Increase in NOA FCFF (NOPAT - Increase in NOA) Discount factor [1/(1+rw)t] Present value of horizon FCFF Cum. present value of horizon FCFF $ 10,548 Present value of terminal FCFF 53,815 Total firm value 64,363 NNO 8,488 Firm equity value $ 55,875 Shares outstanding (millions) 602 Stock price per share $ 92.82
