Financial Statement Analysis and Valuation 5th edition-chapter-14: I need help with the below-listed problems solutions for the Module 14 -Operating-Income-Based Valuation - Question - P14-30. Estimating Share Value Using the ROPI Model

Following are forecasted sales, NOPAT, and NOA for Colgate-Palmolive Company for 2016 through 2019.

$ millions Reported 2015 Forecast Horizon 2016 2017 2018 2019

Sales. . . . . . . . . . . . . . . . . $16,034 $16,836 $17677 $18561 $19489

NOPAT . . . . . . . . . . . . . . . 2,247 3,199 3,359 3,527 3,703

NOA . . . . . . . . . . . . . . . . . 5,557 5,836 6,127 6,434 6,755

Required

a) Forecast the terminal period values assuming a 1% terminal period growth for all three model inputs that is sales, NOPAT and NOA

b) Estimate the value of a share of Colgate-Palmolive common stock using the residual operating income (ROPI) model. Assume a discount rate (WACC) of 7.5%, common shares outstanding of 893 million, net nonoperating obligations (NNO) of $5,601 million, and non-controlling interest (NCI) from the balance sheet of $255 million.

c) Colgate-Palmolive stock closed at $67.22 on February 18, 2016, the date the Form 10-K was filed with the SEC.

How does your valuation estimate compare with this closing price?

What do you believe are some reasons for the difference?

What investment decision is suggested from your results?