Question text
Valuation Using Income
Statement Multiples
The following table provides summary data for Target and its
competitors, Kohl's and Wal-Mart.
(in millions) | Target | Kohl's | Wal-Mart |
---|---|---|---|
Company assumed value | -- | $23,098 | $237,306 |
Equity assumed value | -- | $22,470 | $198,288 |
NOPAT | $3,159 | $1,152 | $13,354 |
Net income | $2,787 | $1,109 | $12,178 |
Net nonoperating obligations (assets) | $10,109 | $628 | $39,018 |
Common shares outstanding | 860 shares | 321 shares | 41 shares |
(a) Compute the price to NOPAT ratio for both Kohl's and Wal-Mart.
Round your answers to
two decimal places.
Kohl's Answer
Mark 0.00 out of 1.00
Wal-Mart Answer
Mark 0.00 out of 1.00
(b) Use Kohl's and Wal-Mart as comparables, along with the company
value to NOPAT ratios from part (a), and then estimate for Target
its company intrinsic value, its equity intrinsic value, and its
equity intrinsic value per share. (Round the intrinsic value and
equity intrinsic value to the nearest million and the value per
share to the nearest cent.)
Average of the two rounded ratios in (a) above
Answer
Mark 0.00 out of 1.00
(Round to two decimal places.)
Use your rounded answer above to calculate the following:
Intrinsic value $Answer
Mark 0.00 out of 1.00
million
Equity intrinsic value $Answer
Mark 0.00 out of 1.00
million
Equity intrinsic value per share $Answer
Mark 0.00 out of 1.00
(c) Compute the price to net income ratio for both Kohl's and
Wal-Mart.
Round your answers to
two decimal places.
Kohl's Answer
Mark 0.00 out of 1.00
Wal-Mart Answer
Mark 0.00 out of 1.00
(d) Use Kohl's and Wal-Mart as comparables, along with the equity
to net income ratios from part (c), and then estimate for Target
its equity intrinsic value and its equity intrinsic value per
share. (Round the equity intrinsic value to the nearest million and
the value per share to the nearest cent.)
Average of the two rounded ratios in (c) above
Answer
Mark 0.00 out of 1.00
(Round to two decimal places.)
Use the rounded
average calculated above to calculate the following:
Equity intrinsic value $Answer
Mark 0.00 out of 1.00
Equity intrinsic value per share $Answer
Answer :-
a) Price to NOPAT (Kohl) = $23,098 / $1152 = 20.05
Price to NOPAT (Wal-mart) = $237,306 / $13,354 =17.77
b) Avg. Price to NOPAT = (20.05 + 17.77)/2 = 18.91
company Intrinsic Value (Target) = 18.91*$3159 = $59,737.00
Equity Intrinsic Value = Company Intrinsic Value - Net Non Operating Obligations
Target :-
Equity Intrinsic Value = ($59,737- $10,109) = $49,628
Equity Intrinsic Value per Share = $49,628/ 860 = $57.71
c) Equity Value to Net income :-
Kohl = Equity Assumed Value / Net Income
= $22,470 / $1,152
= 19.50
Wal Mart = $198,288 / $12,178 = 16.28
Avg. Equity value to Net Income = (19.50+ 16.28)/2 = 17.89
d) Equity Value for Target :-
= $2,787*17.89
= $49,859.43
Equity Value Per Share of Target :-
= $49,859.43 / 860
= $57.98
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