Estimating Share Value Using the DCF Model
Following are forecasts of Abercrombie & Fitch Co.'s sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of February 2, 20 13.
Answer the following requirements assuming a discount rate (WACC) of 10%, a terminal period growth rare of 2%, common shares outstanding of 78.4 million, and net nonoperating obligations (NNO) of $(372) million (negative NNO reflects net nonoperaring assets such as investments rather than net obligations) .
a. Estimate the value of a share of Abercrombie & Fitch common stock using the discounted cash flow (DCF) model as of February 2, 2013.
b. Abercrombie & Fitch (ANF) stock closed at $45.46 on April 2, 20 I 3, 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?
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