Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

CF8,17 Continue using the data in Exhibit 8.2 for GIS, CPB, and SIM to estimate the value per share of K using a BV multiple.

image text in transcribed
image text in transcribed
CF8,17 Continue using the data in Exhibit 8.2 for GIS, CPB, and SIM to estimate the value per share of K using a BV multiple. Determine whether, based on this cstimate, K is over-or underpriced at its May 1, 2019 price of $9.39, Discuss the validity of the result und what drives your conclusions. For each company shown in Exhibit 8.2, NOA, book value of equity, amount owed to debt holders, and common shares outstanding are found from the most recent quarter balance sheets using an approach similar to our previous analysis of the balance sheet data. For the comparable companies, the equity value is equal to the closing price per share at May 1,2019 (the date of our valuation), multiplied by common shares outstanding per the most recent financial statements. Also, for the comparable companies, the openating value is equal to the equity value plus the book value of amounts owed to debt holders per the most recent financial statements. 5 We use the data from Exhibit 8.2 to compule a market multiple based on NOA to estimate the value of GIS. We begin by determining the NOA market multiple for K, CPB, and SJM, which is computed as the operating value divided by NOA. Exhihit 8.3 shows the results of this computation For example, K's NOA market multiple is 2,49 , computed as $29,831/$12,002. We then average the NOA market multiples of the comparable companies (Le, K, CPB, and SJM) to get 1.95 , computed as (2.49+1.95+1.42)/3. This market multiple is used to estimate the operating value of GIS as follows: Operatingvalue=NOANOAmarketmultiple$44,078=$22,6041.95 In order to obtain GIS' equity value, we subtract the amount owed to debt holders (NFL) from its estimated operating value. The equity value is then divided by shares outstanding to yield the pershare value of common equity in GIS, as follows: Equityvalue=OperatingvalueAmountowedtodebtholders(NFL)$28,404=$44,978$15,674

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Data Analytics Using Microsoft Excel With Accounting And Finance Datasets Version 2.0

Authors: Joseph M. Manzo

1st Edition

1453395210, 9781453395219

More Books

Students also viewed these Accounting questions

Question

If you were Akio, what would you do now?

Answered: 1 week ago