Estimating Share Value Using the DCF Model Following are forecasted sales, NOPAT, and NOA for AT&T...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Estimating Share Value Using the DCF Model Following are forecasted sales, NOPAT, and NOA for AT&T for 2019 through 2022 Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places. a. Forecast the terminal period values assuming the following terminal period growth rate. Assumption Terminal period growth rate 2% Reported Forecast Horizon Period $ millions Sales NOPAT 2018 2019 $173,439 NOA 23,578 371.722 24,765 26,090 27.495 393,614 417,070 441,934 2020 2021 $183,684 $194,544 $206,056 $218,259 $ 28,983 468,290 2022 Terminal Period 219,888 x 26,826.27 x 474.919 X b. Estimate the value of a share of AT&T common stock using the discounted cash flow (DCF) model as of December 31, 2018 using the following assumptions and the information above. Assumptions Discount rate (WACC) Common shares outstanding 5.70% 7,281.6 million Net nonoperating obligations (NNO) $177,838 million Noncontrolling interest $12,478 million Reported Forecast Horizon Terminal ($ millions) Increase in NOA 2018 2019 2020 2021 2022 Period $ 0 * $ 0 x $ 0 x $ 0x FCFF (NOPAT - Increase in NOA) 0 % 0x 0 X Present value of horizon FCFF 0 x 0X 0X Cum. present value of horizon FCFF $ 47 x Present value of terminal FCFF 473.35 x Total firm value 520.35 x Less (plus) NNO 177,838 Less NCI 12,478 v Firm equity value $ 0 X Shares outstanding (millions) 7,281.6 Stock price per share $ 0 X Estimating Share Value Using the DCF Model Following are forecasted sales, NOPAT, and NOA for AT&T for 2019 through 2022 Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places. a. Forecast the terminal period values assuming the following terminal period growth rate. Assumption Terminal period growth rate 2% Reported Forecast Horizon Period $ millions Sales NOPAT 2018 2019 $173,439 NOA 23,578 371.722 24,765 26,090 27.495 393,614 417,070 441,934 2020 2021 $183,684 $194,544 $206,056 $218,259 $ 28,983 468,290 2022 Terminal Period 219,888 x 26,826.27 x 474.919 X b. Estimate the value of a share of AT&T common stock using the discounted cash flow (DCF) model as of December 31, 2018 using the following assumptions and the information above. Assumptions Discount rate (WACC) Common shares outstanding 5.70% 7,281.6 million Net nonoperating obligations (NNO) $177,838 million Noncontrolling interest $12,478 million Reported Forecast Horizon Terminal ($ millions) Increase in NOA 2018 2019 2020 2021 2022 Period $ 0 * $ 0 x $ 0 x $ 0x FCFF (NOPAT - Increase in NOA) 0 % 0x 0 X Present value of horizon FCFF 0 x 0X 0X Cum. present value of horizon FCFF $ 47 x Present value of terminal FCFF 473.35 x Total firm value 520.35 x Less (plus) NNO 177,838 Less NCI 12,478 v Firm equity value $ 0 X Shares outstanding (millions) 7,281.6 Stock price per share $ 0 X
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
(a) For a fiber-reinforced composite, the efficiency of reinforcement ? is dependent on fiber length l according to where x represents the length of the fiber at each end that does not contribute to...
-
Assume that Microsoft has a total market value of $300 billion and a marginal tax rate of 35%. If it permanently changes its leverage from no debt by taking on new debt in the amount of 13% of its...
-
Botella Company produces plastic bottles. The unit for costing purposes is a case of 18 bottles.The following standards for producing one case of bottles have been established: Direct materials (4...
-
Presented below are selected financial data for two competitors. Discuss why the return on assets increased for Company A but decreased for Company B. Company A. Company B Return on Assets Return on...
-
The average number of minutes Americans commute to work is 27.7 minutes (Sterlings Best Places, April 13, 2012). The average commute time in minutes for 48 cities are as follows: a. What is the mean...
-
Imagine that the custom-designed furniture, which takes on average 7 hours to complete and sales for an average of $1,825, has the following costs: Specialize labor for custom pieces: $150/hr Machine...
-
A steel pinion having a diameter of about 254 mm meshes with a steel gear which turns at 1/3 the angular speed of the pinion. The torque of 3,222 kgcm (18,000 lb-in). The angle of cut of the teeth is...
-
Landmark decisions establish a significant new legal principle or concept or otherwise that substantially changes the interpretation of existing law. Such a decision may settle the law in more than...
-
Julian built a setup with two parallel plates separated by an insulating gap. One plate has an areal charge density + 3 sigma and the other an areal charge density 2 sigma . Which direction does the...
-
Schylar Pharmaceuticals, Inc., plans to sell 115,000 units of antibiotic at an average price of $23 each in the coming year. Total variable costs equal $846,400. Total fixed costs equal $7,400,000....
-
Sunland Company reported the following information in its general ledger at December 31. All sales were on account. At the end of the year, uncollectible accounts were estimated to be 11% of accounts...
-
Should a new patient garner more attention as the practitioner reviews the medical history versus a patient of record? What follow-up questions needed to be asked about the medications the patient...
-
Shondra has invested in a boutique with three friends as a partnership. They reported that her share of the income from the partnership was $3,300. In addition, Shondra has a small parcel of land...
-
For the next several days, take notes on your listening performance during at least a half-dozen situations in class, during social activities, and at work, if applicable. Referring to the traits of...
-
Objections to monopolies do not include which of the following? a. They reduce output below the efficient level of output that would be produced in perfect competition. b. They reduce the price below...
-
If regulators set a price according to marginal cost pricing, the firm will a. earn positive economic profits. b. make zero economic profits. c. suffer an economic loss. d. earn the same level of...
-
What is the objective of antitrust policy?
Study smarter with the SolutionInn App