ACT5725 The following table provides summary data for Applied Materials Inc. and
ID: 2577407 • Letter: A
Question
ACT5725
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
KLA Tencor
Lam Research
Net Income per share
$ 2.67
$ 4.49
Price per Share
$ 62.00
$ 72.74
Price to net income ratio
23.25
16.22
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
KLA Tencor
Lam Research
Net Income per share
$ 2.67
$ 4.49
Price per Share
$ 62.00
$ 72.74
Price to net income ratio
23.25
16.22
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
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