Refer to the information in Exercise 20-34.

Required:

1. Calculate free cash flow at Williams Company for each of the two years.

2. Develop a business valuation for Williams Company for 2022 using the following methods: 

(1) Book value of equity, 

(2) Market value of equity, 

(3) Discounted cash flow (DCF), 

(4) Enterprise value, 

(5) All the multiples-based valuations for which there is an industry average multiplier. 

For the calculation of the DCF valuation, you may use the simplifying assumption that free cash flows will continue indefinitely at the amount in 2022.

Exercise 20-34.

Williams Company is a manufacturer of auto parts having the following financial statements for 2021–2022.

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Balance Sheet December 31, 2022 2021 Cash Accounts receivable Inventory $ 135,000 225,000 175,000 $ 535,000 1,500,000 $ 2,035,000 $ 175,000 800,000 1,060,000 $ 2,035,000 $ 260,000 150,000 385,000 Total current assets $ 795,000 Long-lived assets Total assets Current liabilities Long-term debt Shareholders' equity Total debt and equity 1,640,000 $2,435,000 $ 200,000 900,000 1,335,000 $2,435,000 Income Statement For the Years Ended December 31 2022 2021 $3,600,000 2,600,000 1,000,000 450,000 550,000 192,500 $357,500 Sales Cost of sales Gross margin $3,500,000 2,500,000 1,000,000 Operating expenses* Operating income Тахes Net income 500,000 500,000 175,000 $ 325,000