P13-28. Estimating Share Value Using the DCF Method. Following are forecasted sales, NOPAT, and NOA for AT&T for 2019 through 2022. Forecast Horizon Period Reported $ millions 2018 2019 2020 2021 2022 Sales…………………………………$ 170,756 181,001 191,861 203,373 215,576 NOPAT……………………………… 20,895 22,082 23,407 24,812 26,300 NOA………………………………….. 369,039 390,931 414,387 439,251 465,607 Required. a. Forecast the terminal period values assuming a 2% terminal period growth rate. b. Estimate the value of a share of AT&T common stock using the discounted cash flow (DCF) model as of December 31, 2018; assume a discount rate (WACC) OF 5.7%, common shares outstanding of 7,281.6 million, net nonoperating obligations (NNO) of $175,155 million, and noncontrolling interest (NCI) from the balance sheet of $9,795 million. c. AT&T closed at $30.85 on February 20, 2019, the date the Form 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? d. If WACC has been 6.2%, what would the valuation estimate have been? What about if WACC has been 2.5%?

answer; signaling;

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans. 

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.