Valuation Using the PE Multiple The following table provides summary data for Ap
ID: 2516850 • Letter: V
Question
Valuation Using the PE Multiple
The following table provides summary data for Applied Materials Inc. and its competitors, KLA Tencor Corporation and Lam Research Corporation.
(in millions)
a. Compute the price to net income ratio for both KLA Tencor Corporation and Lam Research Corporation.
Round answers to two decimal places, when applicable.
b. Use KLA Tencor Corporation and Lam Research Corporation as comparables, along with the price to net income ratios from part a, and then estimate for Applied Materials Inc. its equity intrinsic value and its equity intrinsic value per share.
Round equity intrinsic value to the nearest million.
Round equity intrinsic value per share to two decimal places.
(in millions)
Applied Materials KLA Tencor Lam Research Company assumed value - $9,790 $11,529 Equity assumed value - $8,987 $13,244 NOPAT $1,444 $440 $674 Net income $1,377 $421 $711 Net nonoperating obligations (assets) $(1,369) $803 $(1,715) Common shares outstanding 1,160.0 157.9 158.5Explanation / Answer
a. Computation of Price to Net Income Ratio ( in Million) KLA Tencor Lam Research Net income (a) $421.00 $711.00 No. of Share Outstanding (b) 157.9 158.5 Net Income Per Share(c= a/b) $2.67 $4.49 Company Assumed Value ( d) $9,790.00 $11,529.00 Price per Share (e= d/b) $62.00 $72.74 Price to net income ratio(e/c) 23.25 16.22 Computation of Intrinsic Value and Value per Share Comparables For Applied Materials Inc. KLA Tencor Lam Research Net income Per Share $1.24 $1.24 Price to net income ratio $23.25 $16.22 Equity Intrinsic Value per share $28.95 $20.19 Equity Intrinsic Value $33,579.00 $23,414.73
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.