Question

Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2017 for Stellar Stores, Inc. Horizon Period (in millions) Reported 2017 2018 2019 2020 2021 Terminal Period Sales $37,006 $44,777 $54,180 $65,558 $79,325 $80,912 NOPAT 1,292 1,563 1,891 2,288 2,768 2,824 NOA 10,007 102 14,643 17,718 21,439 21,868 Assuming a terminal period growth rate of 2%, a discount rate (WACC) of 8%, common shares outstanding of 814.3 million, and net nonoperating obligations (NNO) of $1,676 million, estimate the value of a share of Stellar common stock using the discounted cash flow (DCF) model as of December 31, 2017.

Answer 1

Step-by-step explanation:

Current Forecast Horizon Terminal

Year ($ millions) 2017 2018 2019 2020 2021 Sales ........................................................$2,785 $3,838 $5,289 $7,288 $10,043 $10,244 ....................................................330 455 627 864 1,190 1,214NOA .........................................................533 735 1,012 1,395 1,922 1,961ROPI Model

NOPAT – [NOABeg× rDiscount

factor [1 / (1 × ] ...................0.88496 0.78315 0.69305 0.61332 Present value of horizon ................342 416 507 619 present value of horizon ........$1,884 Present value of terminal ...............5,375 .........................................................533 Total firm value ........................................$7,792 Less ..............(462) Firm equity value .....................................8,254 Shares outstanding (millions) ..................103.3 Stock value per share ..............................$ 79.90