Question

Harley-Davidson Inc. produces motorcycles, motorcycle parts and related accessories and merchandise in the United States and internationally. It is headquartered in Milwaukee, Wisconsin.

Use the following information on Harley-Davidson and five other similar companies to value Harley-Davidson as of December 31, 2004.(answer in billions. round to 1 decimal) ANSWER IN BILLIONS ROUND TO 1 DECIMAL PLEASE

	Harley-Davidson Inc. 2004 ($ millions)				Price/earnings (x)
Net income	$     889.77			Arctic Cat	16.9
Number of common shares, millions	294.31			Brunswick	17.8
Earnings before interest and tax	$ 1,506.16			Polaris Industries	27.8
Tax rate	35.0%			Marine Products	28.6
Book value of equity	$ 3,218.47			Winnebago Industries	18.6
Book value interest-bearing debt	$ 1,295.44
Total Sales	$ 5,320.45
Total Assets	$ 5,483.29

Answer 1

Take the average PE ratio of the given 5 companies = (16.9+17.8+27.8+28.6+18.6)/5 = 21.94

(Note: Usually the comparable companies are researched and then weights are assigned accordingly to come up with a suitable ratio. Since no information is provided here, an average has been taken.)

Net income = 889.77 million

Equity valuation = 21.94*889.77 = 19,521.55 million or 19.5 billion

Value per share = equity value/shares O/S = 19,521.55/294.31 = $66.33

Enterprise Value = equity value + debt value = 19,521.55 + 1,295.44 = 20,816.99 million or 20.8 billion

(Note: EV is calculated as market value of equity + market value of debt - cash and cash equivalents - non-cash surplus assets. Book value of debt is given here so it has been used. Cash and cash equivalents etc are not provided in the question.)