Valuation Using Price-to-NOA Multiple and PB Multiple The following table provid
ID: 2594774 • Letter: V
Question
Valuation Using Price-to-NOA Multiple and PB Multiple The following table provides summary data for Target and its competitors, Kohl's and Wal-Mart. Kohl's Wal-Mart $23,098 $237,306 $22,470 $198,288 $6,040 $89,991 $5,603 $61,573 $628 $39,018 860 shares 321 shares 41 shares (in millions) Target Company assumed value Equity assumed value Net operating assets Book value of equity Net nonoperating obligations (assets) Common shares outstanding (a) Compute the price to net operating assets ratio for both Kohl's and Wal-Mart. Round your answers to two decimal places Kohl's 0.01 Wal-Mart 0.02 $25,952 $15,033 $10,109 (b) Use Kohl's and Wal-Mart as comparables, along with the price to NOA 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.Explanation / Answer
A) Price to Net Operating Assets Ratio
Fomula : Price or Company assumed Value / Net Opeating Assets Ratio
KOHLS : 23098/6040 = 3.82417 = 3.82
WALMART: 237306/89991 = 2.636997 = 2.64
B) Average ratio of Price to Net operating assets ratio = (3.82 +2.64)/2 = 3.23
Company intrinsic Value
Formula : Target net operating assets * Average ratio of Price to Net Operating Assets
Company Intrinsic Value = 25952*3.23 = 83824.96
Equity Instrinsic Value : Formula = Book Value of Equity * Average Ratio of price to Net Operating Assets
= 15033*3.23 = 48556.59
Equity Intrinsic Value per share :
Equity Instrinsic Value Per share : Formula = Equity Intrinsic Value/Target Common Shares outstanding
= 48556.59/860 shares = 56.46115
C) PB ratio: Equity Assumed Value / Book value of Equity
KOHLS : 22470 / 5603 = 4.01035 = 4.01
WALL MART ; 198288/61573 = 3.2203 = 3.22
Average PB Ratio: = (4.01+3.22 ) /2 = 3.615 = 3.62
Equity Intrinsic Value using PB ratio ; Target Book value of Equity * Average PB ratio
= 15033*3.62 = 54419.46
Equity Instrinsic Value Per share using PB ratio : Formula = Equity Intrinsic Value calculated using PB ratio /Target Common Shares outstanding
=54419.46/860 = 63.278
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