Estimating Share Value Using the ROPI Model Following are forecasts of
Target Corporation's sales, net operating profit after tax (NOPAT), and net
operating assets (NOA) as of February 2, 2019, which we label fiscal year 2018.
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.
Answer & Explanation
To estimate the share value using the Residual Operating Income (ROPI) model,
you need to follow these steps:
1. Calculate Residual Operating Income (ROPI):
oROPI = NOPAT - (NOA * WACC)
oWhere WACC is the Weighted Average Cost of Capital.
2. Forecast Future ROPI:
oUse the provided forecasts for sales, NOPAT, and NOA to calculate
future ROPI for each year.
