Brooks Plumbing Products Incorporated $($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 Incorporated $($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 $$41$ cash per share for their stock, which is greater than the current stock price; the stock has traded at about $$36$ in recent months. Summary financial information about BPP follows.

BROOKS PLUMBING PRODUCTS INCORPORATED

Selected Financial Information

For the Years Ended December $31$

$202220212022$ Industry Average

Cash $ $80,089,778$ $ $3,626,227$

Accounts receivable $56,948,46587,481,771$

Inventory $39,835,41660,070,645$

Long$-$lived assets

Gross book value $167,448,377143,948,377$

Net book value $100,790,80996,057,302$

Replacement cost $170,757,409188,635,338$

Liquidation value $68,904,00267,505,209$

Current liabilities $119,215,766121,182,274$

Long$-$term debt $32,167,36438,072,302$

Shareholders$$ equity $126,111,33887,811,369$

Capital expenditures $23,670,00013,160,336$

Sales $669,234,771640,476,465$

Cost of sales $499,507,788478,341,001$

Operating expense$*102,837,355134,935,229$

Income tax rate $38\%38\%38\mathrm{.}00\%$

Depreciation expense $18,936,49315,834,254$

Dividends $2,920,0001,420,000$

Year$-$end stock price $ $37\mathrm{.}48$ $ $24\mathrm{.}69$

Number of outstanding shares $27,389,55424,463,554$

Sales multiplier $1\mathrm{.}50$

Free cash flow multiplier $8\mathrm{.}80$

Earnings multiplier $13\mathrm{.}80$

Cost of capital $4\mathrm{.}9\%4\mathrm{.}9\%$

Accounts receivable turnover $5\mathrm{.}20$

Inventory turnover $8\mathrm{.}60$

Current ratio $1\mathrm{.}80$

Quick ratio $1\mathrm{.}20$

Cash flow ratio $1\mathrm{.}50$

Free cash flow ratio $1\mathrm{.}20$

Gross margin percentage $34\mathrm{.}0\%$

Return on assets $($net book value$)21\mathrm{.}0\%$

Return on equity $30\mathrm{.}0\%$

Earnings per share $ $2\mathrm{.}36$

$*$Operating expense includes depreciation expense.

Required:

$1.$ What is the valuation of BPP $($for $2022)$ using the market value method?

$2.$ What is the valuation of BPP $($for $2022)$ using the book value method?

$3.$ What are the valuations of BPP $($for $2022)$ 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 $2022$ 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 $4,$ Intermediate calculations should be rounded, round your answers to the nearest whole dollar amount.$)$

$1.$ Market value of equity method $($Find$)$

$2.$ Book value of equity method $$126,111,338$

$3.$ Multiples$-$based method $$ Sales $$1,003,852,157$

Multiples$-$based method $$ Earnings $$572,307,652$

Multiples$-$based method $$ Free cash flow $($Find$)$

$4.$ Discounted cash flow method $($Find$)$

$5.$ Which of the methods would you use? Market value of equity method

$6.$ Is the GSI offer a good one? Yes