Estimating Share Value Using the DCF Model

Following are forecasts of Illinois Tool Works Inc. sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2018.

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.

	Reported	Forecast Horizon Period				Terminal
$ millions	2018	2019	2020	2021	2022	Period
Sales	$9,599	$10,175	$10,785	$11,433	$12,119	$12,361
NOPAT	1,762	1,872	1,984	2,103	2,230	2,274
NOA	6,150	6,518	6,910	7,324	7,764	7,919

Answer the following requirements with the following assumptions:

Assumptions
Terminal period growth rate	2%
Discount rate (WACC)	7.35%
Common shares outstanding	213.00	million
Net nonoperating obligations (NNO)	$4,033	million

(a) Estimate the value of a share of ITWs common stock using the discounted cash flow (DCF) model as of December 31, 2018.

		Reported	Forecast Horizon				Terminal
	($ millions)	2018	2019	2020	2021	2022	Period
	Increase in NOA
	FCFF (NOPAT - Increase in NOA)
	Present value of horizon FCFF
	Cumulative. present value of horizon FCFF
	Present value of terminal FCFF
	Total firm value
	NNO
	Firm equity value
	Shares outstanding (millions)
	Stock price per share