Estimate the value of a share of home depot common stock

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Reference no: EM133326553

Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 30,20, for Home Depot.

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	Period
Sales	$108,203	$110,225	$132,110	$151,157	?
NOPAT	11,865	12,104	13,855	17,418	?
NOA	16,407	16,679	22,869	30,044	?

Answer the following requirements with the following assumptions:

Assumptions
Terminal period growth rate	2%
Discount rate (WACC)	7.2%
Common shares outstanding	135	million
Net nonoperating obligations (NNO)	$(21,737)	million
Noncontrolling interest	$29,343	million

NNO is negative because Home Depot's non operating assets exceed its non operating liabilities.

Question: (1) Estimate the value of a share of Home Depot common stock using the discounted cash flow (DCF) model as of December 31, 2018.

Question: (2) Perform sensitivity analysis of the valuation results in part A, such as that for sales growth rate, key forecast assumptions, terminal growth rate, and WACC. Interpret all findings.

Reference no: EM133326553

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