Business valuation for Williams Company for 2019
Williams Company is a manufacturer of auto parts having the following financial statements for 2018-2019. Balance Sheet December 31 2019 2018 Cash 264, 000 139, 000 Accounts receivable 154, 000 229, 000 Inventory 389, 000 179, 000 Total current assets S 807, 000 547, 000 Long-lived assets 1, 680, 090 540, 000 Total assets $2 , 487, 090 $2, 087, 000 Current liabilities 248, 000 215, 000 Long-term debt 900 , 000 840, 000 Shareholders' equity 1, 339, 050 1, 032, 000 Total debt and equity $2 , 487, 900 $2, 087 , 000 Income Statement For the years ended December 31 2019 Sales 2018 $3, 540, 000 Cost of sales 2, 580, 000 Gross margin 960, 000 Operating expenses* 504, 000 960 . 900 406, 000 Operating income 456, 000 5 54, 000 Taxes 159, 600 193,900 Net income $ 296, 400 $ 360, 100Cash Flow from Operations 2019 2018 Net income $ 296, 400 $ Plus depreciation expense 80, 000 360, 100 70, 000 Decrease (-increase) in accounts receivable and inventory (135, 000) Increase ( decrease) in current liabilities 133 , 000 Cash flow from operations $ 274, 400 430, 100 *Operating expenses include depreciation expense Additional financial information, including industry averages for 2019, where appropriate, includes: Industry 2019 2018 2019 Capital expenditures S 105, 000 9 140, 000 Income tax rate 35 . 03 Depreciation expense 80, DOD Dividends 46, 000 70, 000 46, 000 ar-end stock price In to 2. 65 25.00 Number of outstanding shares 1, 840, DO0 1, 840, 000 Sales multiplier 1 . 50 Free cash flow multiplier 18.00 Earnings multiplie Cost of capital Accounts receivable turnover 11 Inventory turnover - 10 10. 50 Current ratio Quick ratio Cash flow from operations repie Free cash flow ratioIndustry 2019 2018 2019 Capital expenditures 105, 000 $ 140,000 Income tax rate 35% 35% 35. 08 Depreciation expense 80, 000 70, 000 Dividends 46, 000 46, 000 Year-end stock price 2 . 65 3 25.00 Number of outstanding shares 1, 840, 000 1, 840, 000 Sales multiplier 1 . 50 Free cash flow multiplier 18 . 00 Earnings multiplier 9. 00 Cost of capital Accounts receivable turnover 11 . 10 Inventory turnover 10 .50 Current ratio 2 . 30 Quick ratio 1. 90 Cash flow from operations ratio 1. 20 Free cash flow ratio 1 . 10 Gross margin percentage 30 . 09 Return on assets (net book value) 20 .08 Return on equity 30 . 08 Required: Develop a business valuation for Williams Company for 2019 using the following methods: (1) book value of equity, (2) market value of equity, (3) discounted cash flow (DCF). (4) enterprise value, and (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 2019
