Question

Question text Estimating Share Value Using the DCF Model Following are the income statement and balance sheet for Texas Roadhouse for the year ended December 29, 2015. a. Assume the following forecasts for TXRH’s sales, NOPAT, and NOA for 2016 through 2019. Forecast the terminal period values assuming a 1% terminal period growth rate for all three model inputs: Sales, NOPAT, and NOA. Round your answers to the nearest dollar.

	Reported	Forecast Horizon				Terminal
$ thousands	2015	2016	2017	2018	2019	Period
Sales	$1,807,368	$2,060,400	$2,348,855	$2,513,275	$2,689,205	Answer
NOPAT	102,495	168,953	192,606	206,089	220,515	Answer
NOA	662,502	755,279	861,017	921,288	985,779	Answer

b. Estimate the value of a share of TXRH common stock using the discounted cash flow (DCF) model as of December 29, 2015; assume a discount rate (WACC) of 7%, common shares outstanding of 70,091 thousand, net nonoperating obligations (NNO) of $(14,680) thousand, and noncontrolling interest (NCI) from the balance sheet of $7,520 thousand. Note that NNO is negative because the company’s cash exceeds its nonoperating liabilities.

Rounding instructions:

• Use rounded answers for subsequent computations.

• Round answers to the nearest whole number unless otherwise noted.
• Round discount factor to 5 decimal places and stock price per share to two decimal places.

• Do not use negative signs with any of your answers below.

  TXRH	Reported			Forecast Horizon		Terminal
  $ thousands	2015	2016	2017	2018	2019	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 ]		Answer	Answer	Answer	Answer
  Present value of horizon FCFF		Answer	Answer	Answer	Answer
  C u m PV of horizon FCFF	Answer
  Present value of terminal FCFF	Answer
  Total firm value	Answer
  NNO	Answer
  NCI	Answer
  Firm equity value	Answer
  Shares outstanding (thousands)	Answer
  Stock price per share	Answer

Answer 1

	Reported	Forecast Horizon
$ thousands	2015	2016	2017	2018	2019	Terminal Period
Sales	$1,807,368	$2,060,400	$2,348,855	$2,513,275	$2,689,205	$2,716,097.05
NOPAT	102,495	168,953	192,606	206,089	220,515	$222,720.15
NOA	662,502	755,279	861,017	921,288	985,779	$995,636.79

TXRH	Reported			Forecast Horizon		Terminal
$ thousands	2015	2016	2017	2018	2019	Period
Increase in NOA		$     92,777.00	$ 105,738.00	$   60,271.00	$      64,491.00	$       9,857.79
FCFF (NOPAT - Increase in NOA)		$     76,176.00	$   86,868.00	$ 145,818.00	$    156,024.00	$   212,862.36
Discount factor [1 / (1 + 7%)^t ]		0.93458	0.87344	0.81630	0.76290
Present value of horizon FCFF		$     71,192.52	$   75,873.88	$ 119,030.92	$    119,029.96
PV of horizon FCFF	$                   385,127.29
Present value of terminal FCFF	$                2,706,527.92
Total firm value	$                3,091,655.21
NNO	$                     14,680.00
NCI	$                       7,520.00
Firm equity value	$                3,098,815.21
Shares outstanding (thousands)	70,091.00
Stock price per share	$                            44.21