Estimating Share Value Using the DCF Model Following are forecasts of Home Depots sales, net...
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Accounting
Estimating Share Value Using the DCF Model Following are forecasts of Home Depots sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 3, 2019, which the company labels fiscal 2018.
Forecast Horizon Period
Reported
Terminal
$ millions
2018
2019
2020
2021
2022
Period
Sales
$108,203
$115,777
$123,882
$132,553
$141,832
$144,669
NOPAT
12,073
12,967
13,875
14,846
15,885
16,203
NOA
25,546
27,332
29,245
31,292
33,483
34,152
Answer the following requirements assuming a discount rate (WACC) of 7.85%, a terminal period growth rate of 2%, common shares outstanding of 1,105 million, net nonoperating obligations (NNO) of $27,424 million.
Required a. Estimate the value of a share of Home Depots common stock using the discounted cash flow (DCF) model as of February 3, 2019.
Note: Do not round until your final answer; round your final answer to two decimal places.
Stock price per share: $Answer b. Home Depot stock closed at $190.06 on March 28, 2019, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price?
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