Estimating Share Value Using the ROPI Model
Assume following are forecasts of Abercrombie & Fitch's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 29, 2011. Refer to the information in the table to answer the following requirements.
| Sales |
$ 3,750 |
$ 4,500 |
$ 5,400 |
$ 6,480 |
$ 7,776 |
$ 7,853 |
| NOPAT |
464 |
581 |
679 |
815 |
957 |
978 |
| NOA |
1,350 |
1,624 |
1,922 |
2,306 |
2,798 |
2,796 |
Answer the following requirements assuming a discount rate (WACC) of 13.3%, a terminal period growth rate of 1%, common shares outstanding of 86.2 million, and net nonoperating obligations (NNO) of $(288) 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 residual operating income (ROPI) model as of January 29, 2011. Rounding instructions: Round answers to the nearest whole number unless noted otherwise. Use your rounded answers for subsequent calculations.
| ROPI (NOPAT - [NOABeg × rw]) |
|
Answer |
Answer |
Answer |
Answer |
Answer |
| Discount factor [1 / (1 + rw)t ](round 5 decimal places) |
|
Answer |
Answer |
Answer |
Answer |
|
| Present value of horizon ROPI |
|
Answer |
Answer |
Answer |
Answer |
|
| Cum present value of horizon ROPI |
$ Answer |
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| Present value of terminal ROPI |
Answer |
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| NOA |
Answer |
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| Total firm value |
Answer |
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| Plus negative NNO |
Answer
|
(enter as
negative number) |
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| Firm equity value |
$Answer |
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| Shares outstanding (millions) |
Answer |
(round one
decimal place) |
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| Stock price per share |
$Answer |
(round two
decimal places) |