Estimating Share Value Using the DCF Model

Following are forecasts of Abercrombie & Fitch's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 29, 2011. (Current-year NOPAT is lower due to transitory items; we use a longer term estimate for NOPM of 8%.)

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	Reported	Horizon Period
(In millions)	2011	2012	2013	2014	2015	Terminal Period
Sales	$ 3,469	$ 3,989	$ 4,587	$ 5,275	$ 6,066	$ 6,187
NOPAT	152	319	367	422	485	495
NOA	1,032	1,173	1,349	1,551	1,784	1,820

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Answer the following requirements assuming a discount rate (WACC) of 10%, a terminal period growth rate of 2%, common shares outstanding of 87.2 million, and net nonoperating obligations (NNO) of $(858) 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 discounted cash flow (DCF) 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.

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	Reported	Horizon Period
(In millions)	2011	2012	2013	2014	2015	Terminal Period
Increase in NOA		Answer	Answer	Answer	Answer	Answer
FCFF (NOPAT - Increase in NOA)		Answer	Answer	Answer	Answer	Answer
Discount factor [1 / (1 + rw)t ]	(Round to 5 decimal places)	Answer	Answer	Answer	Answer
Present value of horizon FCFF		Answer	Answer	Answer	Answer
Cm present value of horizon FCFF	$ Answer
Present value of terminal FCFF	Answer
Total firm value	Answer
Plus negative NNO	Answer	(enter as negative number)
Firm equity value	$Answer
Shares outstanding (millions)	Answer	(round one decimal place)
Stock price per share	$Answer	(round two decimal places)