Estimating Share Value Using the ROPI Model

Following are the income statement and balance sheet for Texas Roadhouse for the year ended December 29, 2015.

Assume the following forecasts for TXRHs sales, NOPAT, and NOA for 2016 through 2019. Forecast the terminal period values assuming a 1% terminal period growth rate for all three model inputs: Sales, NOPAT, and NOA.

Round your answers to the nearest dollar.

	Reported	Forecast Horizon				Terminal
$ thousands	2015	2016	2017	2018	2019	Period
Sales	$1,807,368	$2,069,436	$2,369,504	$2,559,064	$2,763,789
NOPAT	102,495	169,694	194,299	209,843	226,631
NOA	662,502	758,591	868,587	938,073	1,013,119

a. Estimate the value of a share of TXRH common stock using the residual operating income (ROPI) model as of December 29, 2015; assume a discount rate (WACC) of 7%, common shares outstanding of 70,091 thousand, net nonoperating obligations (NNO) of $(14,680) thousand, and noncontrolling interest (NCI) from the balance sheet of $7,520 thousand. Note that NNO is negative because the companys cash exceeds its nonoperating liabilities.

Rounding instructions:

• Use rounded answers for subsequent computations.

• Round answers to the nearest whole number unless otherwise noted.
• Round discount factor to 5 decimal places and stock price per share to two decimal places.

Do not use negative signs with any of your answers below.

TXRH	Reported			Forecast Horizon		Terminal
$ thousands	2015	2016	2017	2018	2019	Period
ROPI (NOPAT - [NOABeg rw])
Discount factor [1 / (1 + rw)t ]
Present value of horizon ROPI
Present value of terminal ROPI
NOA
Total firm value
NNO
NCI
Firm equity value
Shares outstanding (thousands)
Stock value per share