Reference no: EM131780233

Estimating Share Value Using the ROPI Model 

Assume following are forecasts of Abercrombie & Fitch's sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of January 29, 2011. Refer to the information in the table to answer the following requirements.

Sales	$ 3,750	$ 4,500	$ 5,400	$ 6,480	$ 7,776	$ 7,853
NOPAT	464	581	679	815	957	978
NOA	1,350	1,624	1,922	2,306	2,798	2,796

Answer the following requirements assuming a discount rate (WACC) of 13.3%, a terminal period growth rate of 1%, common shares outstanding of 86.2 million, and net nonoperating obligations (NNO) of $(288) 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 residual operating income (ROPI) 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.

ROPI (NOPAT - [NOABeg × rw])		Answer	Answer	Answer	Answer	Answer
Discount factor [1 / (1 + rw)t ](round 5 decimal places)		Answer	Answer	Answer	Answer
Present value of horizon ROPI		Answer	Answer	Answer	Answer
Cum present value of horizon ROPI	$ Answer
Present value of terminal ROPI	Answer
NOA	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)