Estimating Share Value Using the DCF Model Following are forecasts of Whole Foods sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of September 25, 2016.Reported Horizon Period
$ millions 2016 2017 2018 2019 2020 Terminal Period
Sales $15,724 $15,881 $16,199 $16,523 $16,853 $17,022
NOPAT 526 524 535 545 556 562
NOA 3,466 3,500 3,570 3,642 3,715 3,752
Answer the following requirements assuming a discount rate (WACC) of 6%, a terminal period growth rate of 1%, common shares outstanding of 318.3 million, and net nonoperating obligations (NNO) of $242 million.
(a) Estimate the value of a share of Whole Foods' common stock using the discounted cash flow (DCF) model as of September 25, 2016.
Rounding instructions:
Round answers to the nearest whole number unless noted otherwise. Use your rounded answers for subsequent calculations.
Do not use negative signs with any of your answers.
Reported Forecast Horizon
($ millions) 2016 2017 2018 2019 2020 Terminal Period
Increase in NOA Answer Answer Answer Answer Answer
FCFF (NOPAT - Increase in NOA) Answer Answer Answer Answer Answer
Discount factor [1 / (1 + rw)t ] (Round 5 decimal places) Answer Answer Answer Answer
Present value of horizon FCFF Answer Answer Answer Answer
CUMULATIVE present value of horizon FCFF $ Answer
Present value of terminal FCFF Answer
Total firm value Answer NNO Answer
Firm equity value $ Answer
Shares outstanding (millions) Answer (Round one decimal place)
Stock price per share $ Answer (Round two decimal places)
(b) Whole Foods stock closed at $30.96 on November 18, 2016, the date the 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?
A. Stock prices are a function of many factors. It is impossible to speculate on the reasons for the difference.
B. Our stock price estimate is only a few cents lower than the Whole Foods market price, indicating that we believe that Whole Foods stock is accurately priced. Our stock price estimate is lower than the Whole Foods market price, indicating that we believe that Whole Foods stock is overvalued.
C. Stock prices are a function of expected NOPAT and NOA, as well as the WACC discount rate. Our lower stock price estimate might be due to more optimistic forecasts or a lower discount rate compared to other investors' and analysts' model assumptions.
D. Our stock price estimate is lower than the Whole Foods market price, indicating that we believe that Whole Foods stock is undervalued. Stock prices are a function of expected NOPAT and NOA, as well as the WACC discount rate. Our lower stock price estimate might be due to more optimistic forecasts or a lower discount rate compared to other investors' and analysts' model assumptions.
Answers
Answer:
Check the explanation for the answer
Explanation:
The price been estimated is bit lower than trading price
The price of the stock is also bit lower with the cents than the whole Foods market price, this indicate that we agree that Whole Foods stock is fixed priced.
Further calculations are been done in the file attached using excel
Related Questions
Photo Frame Company had beginning Work in Process inventory of 1,200 units. There were 3,300 units of product started during the period. Ending Work in Process inventory consisted of 1,500 units that were 50% complete. The total dollar cost associated with production of inventory was $88,000. The cost per equivalent whole unit would be which of the followingA. $51B. $34C. $45D. $37
Suppose the price of widgets rises from $5 to $7 and consumption of widgets falls from 25 widgets a month to 15 widgets. Calculate your price elasticity of demand of widgets. What can you say about your price elasticity of demand of widgets? Is it Elastic, Inelastic, or Unitary Elastic? Why? Please show your work.
Broomhilda manufactures broomsticks for her fellow witch (and wizard) friends. Broomhilda uses a job order cost system and applies overhead to production on the basis of direct labor cost. On September 1, Job 50 (a super deluxe broom complete with a separate sleep space and shower area as well as an espresso machine) was the only job in process. The costs incurred prior to September on this job were as follows: direct materials $20,000, direct labor $12,000, and manufacturing overhead $16,000. As of September 1, Job 49 (a broom shaped like a cat with some extra cargo space for all the cats) had been completed at a cost of $90,000 and was part of finished goods inventory. There was a $15,000 balance in the Raw Materials Inventory account. During the month of September, Broomhilda began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the month for $122,000 and $158,000, respectively. The following additional events occurred during the month.1. Purchased additional raw materials of $90,000 on account.2. Incurred manufacturing overhead costs as follows: indirect materials $17,000 (including broom polish and specially crafted scissors to trim stray twigs), indirect labor $20,000 (Hansel and Gretel clean the shop and run errands for the elves), depreciation expense on equipment $12,000 (Broomhilda has multiple molding stations for each broom she creates), and various other manufacturing overhead costs on account $16,000.3. Assigned direct materials and direct labor to jobs as follows: Job no. Direct Materials Direct Labor50 10,000 5,00051 39,000 25,00052 30,000 20,000Required:a. Calculate the predetermined overhead rate for September, assuming Broomhilda estimates total manufacturing overhead costs of $840,000 and direct labor costs of $700,000 for September.b. Open job cost sheets for Jobs 50, 51, and 52. Enter the September 1 balances on the job cost sheet for Job 50.c. Prepare the journal entries to record the purchase of raw materials, and the manufacturing overhead costs incurred during the month of March.d. Prepare the summary journal entries to record the assignment of direct materials, direct labor, and manufacturing overhead costs to production. In assigning overhead costs, use the overhead rate calculated in (1). Post all costs to the job cost sheets as necessary.e. Total the job cost sheets for any job(s) completed during the month. Prepare the journal entry (or entries) to record the completion of any job(s) during the month.f. Prepare the journal entry (or entries) to record the sale of any job(s) during the month.g. What is the balance in the Finished Goods Inventory account at the end of the month? What job(s) does this balance consist of? 8. What is the amount of over- or underapplied overhead? Prepare the journal entry to close this to Cost of Goods Sold
The following information is available regarding the total manufacturing overhead of Olsen Company for a recent four-month period. Machine Hours Mfg. Overhead April 90,000 $ 170,000 May 80,000 $ 153,000 June 110,000 $ 198,000 July 95,000 $ 181,000 Using the high-low method, compute the fixed element of Olsen's
Answers
Option A
Explanation:
The following formula will be used while calculating the amount
The Amount in y year from x year dollar = ( the amount in x year / CPI of the x year) * CPI of the y year
the amount today
Solving the above equation, we get, = $37.5
the $10 in 1967 will purchase equal to the amount of $37.5 today
Therefore, the Option 1 is the correct option from the given ones.
Answers
Answer:
Dr Bonds payable $90,300,000
Dr loss on early redemption of bonds $5,106,000
Cr Discounts on bonds payable $3,300,000
Cr Cash $92,106,000
Explanation:
The amount of cash paid to bondholders by calling the bonds is the 102% of the face value of $90.3 million i.e $90.3*102%=$92,106,000
The proceeds would debited to cash while the face value of the bond of $90.3 million would be debited to bonds payable account.
In addition the remaining discount of $3.3 million would credited to discounts on bonds payable account.
The loss or gain on the bond call can then be determined as appropriate.
Answers
Answer: Problem detection
Explanation: Problem detection is used in R&D, it is a techniques that asks consumers who are familiar with the product or service to ponder upon an exhaustive list of things that bothers them while using the product.
This is done to find the ideas to make creative strategies and improvements in product/service.
Problem Detection approach identifies and prioritizes the most pressing consumer concerns so that the brand they are associated with can address unmet needs that exist in the marketplace.
b. What percentage of employers in the service industry use succession planning?
c. What skills, education, and training have been provided to potential candidates?
d. What is the designated procedure for assessing and selecting potential candidates?
Answers
All of the following questions are relevant to Mari's decision to fill top positions at the new hotels with internal candidates except What percentage of employers in the service industry use succession planning? Therefore, the correct answer is Option B.
The percentage of employers in the service industry using succession planning is not directly relevant to Maria's decision to fill top positions at the new hotels with internal candidates. Succession planning is a different concept from internal promotions.
Succession planning typically involves identifying and developing potential candidates for higher-level positions within the organization to ensure a smooth transition when key employees retire, leave, or are promoted to other roles. While it can be beneficial for an organization, it is not directly related to the decision of filling top positions at the new hotels with internal candidates.
The other three questions What are the key managerial positions that are available at the new hotels? , What skills, education, and training have been provided to potential candidates? , and What is the designated procedure for assessing and selecting potential candidates? are more prominent to make that decision.
To know more about service industry:
#SPJ3
Answer:
b. What percentage of employers in the service industry use succession planning
Explanation:
GOT IT RIGHT ON TEST 2020
Answers
Answer:
Debit Credit
June 10 Accounts Receivables $8400
Merchandise $8400
June 12 Merchandise $500
Accounts Receivables $500
June 19 Cash 7663
Discount 237
Accounts Receivables $7900
Explanation:
Final answer:
The transactions in Cullumber's books include sales revenue, accounts receivable, sales returns and allowances, and finally a cash entry alongside sales discounts when Marin pays the balance due.
Explanation:
The transactions on the books of Cullumber Company would be recorded as follows:
- On June 10, Marin Company purchases $8,400 worth of goods. In the books of Cullumber, this would be recorded as: Accounts Receivable - Marin Company $8,400andSales Revenue $8,400
- On June 11, Marin pays freight costs of $380. This has no effect on the entries in the books of Cullumber Company.
- On June 12, Goods totaling $500 are returned by Marin. This would be recorded as: Sales Returns and Allowances $500 and Accounts Receivable - Marin Company $500
- On June 19, Marin pays off the balance less the purchase discount. The payment can be recorded as: Cash $7,621, Sales Discounts $279 and Accounts Receivable – Marin Company $7,900. The sales discount is (3% of $8400-$500) = $279.
Learn more about Business Transactions here:
#SPJ3
Year 1 $350,000
Year 2 $475,000
Year 3 $400,000
Year 4 $475,000
Which of the following is the correct calculation of project Delta’s IRR?
A. 5.01%
B. 5.51%
C. 4.26%
D. 6.01%
Answers
Answer:
Correct option is A 5.01%
Explanation:
Let irr be x%
At irr,present value of inflows=present value of outflows.
1,500,000=350,000/1.0x+475,000/1.0x^2+400,000/1.0x^3+475000/1.0x^4
Hence x=irr=5.01%(Approx).