Brooks Plumbing Products Inc. (BPP) manufactures plumbing fixtures and other home improvement products that are sold in Home Depot and Walmart as well as hardware stores. BPP has a solid reputation for providing value products, good quality, and a good price. The company has been approached by an investment banking firm representing a third company, Garden Specialties Inc. (GSI), that is interested in acquiring BPP. The acquiring firm (GSI) is a retailer of garden supplies; it sees the potential synergies of the combined firm and is willing to pay BPP shareholders $39 cash per share for their stock, which is greater than the current stock price; the stock has traded at about $35 in recent months. Summary financial information about BPP follows. BROOKS PLUMBING PRODUCTS INC. Selected Financial Information For the Years Ended December 31 2019 2018 2019 Industry Average Cash $ 79,989,778 $ 3,526,227 Accounts receivable 56,848,465 87,371,771 Inventory 39,735,416 59,960,645 Long-lived assets Gross book value 167,348,377 143,848,377 Net book value 100,690,809 95,957,302 Replacement cost 170,657,409 188,535,338 Liquidation value 68,804,002 67,405,209 Current liabilities 119,115,766 121,072,274 Long-term debt 32,067,364 37,962,302 Shareholders equity 126,011,338 87,711,369 Capital expenditures 23,570,000 13,060,336 Sales 668,234,771 639,476,465 Cost of sales 499,007,788 477,841,001 Operating expense* 102,737,355 134,835,229 Income tax rate 38 % 38 % 38.00 % Depreciation expense 18,836,493 15,734,254 Dividends 2,820,000 1,320,000 Year-end stock price $ 36.48 $ 23.69 Number of outstanding shares 26,389,554 23,463,554 Sales multiplier 1.50 Free cash flow multiplier 8.80 Earnings multiplier 13.70 Cost of capital 5.9 % 5.9 % Accounts receivable turnover 6.20 Inventory turnover 8.60 Current ratio 1.50 Quick ratio 1.20 Cash flow ratio 1.50 Free cash flow ratio 1.20 Gross margin percentage 32.0 % Return on assets (net book value) 19.0 % Return on equity 29.0 % Earnings per share $ 2.30 *Operating expense includes depreciation expense. Required: 1. What is the valuation of BPP (for 2019) using the market value method? 2. What is the valuation of BPP (for 2019) using the book value method? 3. What are the valuations of BPP (for 2019) using the multiples-based methods for sales, earnings, and free cash flow? 4. What is the estimated value for BPP using the discounted free cash flow method, assuming that the 2019 amount of free cash flow continues indefinitely? 5. Which of the methods would you use? 6. Is the GSI offer a good one? (For requirements 1 to 4, round your answers to the nearest whole dollar amount.)