Estimating Share Value Using the ROPI Model

Following are forecasted sales, NOPAT, and NOA for AT&T for 2019 through 2022:

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.

a. Forecast the terminal period values assuming the following terminal period growth rate:
[tex]\[
\begin{aligned}
&\text{Terminal period growth rate} \quad 2\%
\end{aligned}
\][/tex]

\begin{tabular}{|c|c|c|c|c|c|c|}
\hline & \text{Reported} & \text{Forecast Period} & & & & \text{Terminal} \\
\hline & 2018 & 2019 & 2020 & 2021 & 2022 & \text{Period} \\
\hline \text{Sales (\[tex]$ millions)} & \$[/tex]170,756 & \[tex]$181,001 & \$[/tex]191,861 & \[tex]$203,373 & \$[/tex]215,576 & \\
\hline \text{NOPAT (\[tex]$ millions)} & 22,567 & 23,849 & 25,280 & 26,797 & 28,404 & \\
\hline \text{NOA (\$[/tex] millions)} & 398,562 & 422,205 & 447,538 & 474,391 & 502,856 & \\
\hline
\end{tabular}

b. Estimate the value of a share of AT&T common stock using the residual operating income (ROPI) model as of December 31, 2018, using the following assumptions and the information above:

\begin{tabular}{|c|c|c|}
\hline \multicolumn{3}{|l|}{\text{Assumptions}} \\
\hline \text{Discount rate (WACC)} & 5.78\% & \\
\hline \text{Common shares outstanding} & 7,864.1 & \text{million} \\
\hline \text{Net nonoperating obligations (NNO)} & \[tex]$189,167 & \text{million} \\
\hline \text{Noncontrolling interest (NCI)} & \$[/tex]10,579 & \text{million} \\
\hline
\end{tabular}

\begin{tabular}{|c|c|c|c|c|c|c|c|c|}
\hline & \text{Reported} & \text{Forecast Period} & & & & & \text{Terminal} \\
\hline & 2018 & 2019 & 2020 & 2021 & 2022 & \text{Period} \\
\hline \text{ROPI (NOPAT - [NOABeg} \times \text{rw]) (\[tex]$ millions)} & & & & & & & \\
\hline \text{Present value of horizon ROPI (\$[/tex] millions)} & & & & & & & \\
\hline \text{Cumulative present value of horizon ROPI (\[tex]$ millions)} & & & & & & & \\
\hline \text{Present value of terminal ROPI (\$[/tex] millions)} & & & & & & & \\
\hline \text{NOA (\[tex]$ millions)} & & & & & & & \\
\hline \text{Total firm value (\$[/tex] millions)} & & & & & & & \\
\hline \text{Less NNO (\[tex]$ millions)} & & & & & & & \\
\hline \text{Less NCI (\$[/tex] millions)} & & & & & & & \\
\hline \text{Firm equity value (\[tex]$ millions)} & & & & & & & \\
\hline \text{Shares outstanding (millions)} & & & & & & & \\
\hline \text{Stock price per share (\$[/tex])} & & & & & & & \\
\hline
\end{tabular}