Could you please help me for Q2 and 3? Thanks in advance.

week 5 10 nail , and e- commerce channels to help grow the company's revenues at a phenomenal rate . When the Home Shopping Network agreed to let them pro - mote their merchandise about five years ago , major retailers like Wal- Mart* Cam Scanner Valuation of Common Stock and Costco took notice and started stocking Orange Brite products on their shelves ." Within 20 years , sales had grown to over $500 million and their pro- duction facilities were beginning to feel the strain . Their product line had expanded to include air fresheners , soap bars , liquid soaps , spot removers , and a variety of cleaning tools . Through all this success , the Goodmans always focused on customer needs and satisfaction , always encouraging their customers to provide them with feedback and testimonials . Their What Are We Really Worth ? latest addition , an industrial -strength cleanser and wood protector , seemed* to be gaining wide acceptance both in the United States and overseas ." Scanned Wayne , who was nearing 75 years of age , knew that they would need to raise significant capital if they wanted to keep growing and expanding their product line . Still actively involved in the business , he had asked the rest of his family for their suggestions regarding the possibility of going* public by issuing an initial public offering ( IPO ) . Kelly and Joey strongly supported the idea because they felt that with competitors coming up with When Wayne concocted his cleaning compound some 20 years ago , all substitute products , they needed to stay ahead of the game . Billy , on the that his wife , Corrine , and he were trying to do was to come up with a other hand , disagreed and recommended that they outsource production sweeter , gentler yet tougher , cleaning product . Little did he realize that and concentrate on their marketing efforts . He preferred that the firm stay* someday he would be the proud owner of a multimillion- dollar firm debat -* private , relying less on external capital and retaining control .* ing whether or not to sell stock to the public ?\ After carefully weighing all the factors , Wayne decided to explore the After having peddled vacuum cleaners and floor wax products at state possibility of raising the money via an IPO . " Billy , Kelly , and Joey , " he fairs and trade shows throughout the Midwest , Wayne and Corrine Good - said ," the three of you have MBAS from some of the most prestigious man realized that there was a dire need for a cleaning and polishing product* business schools in the country . I'm sure you guys can figure out what that was free from harsh chemicals , environmentally friendly , and tough we're really worth ! I hate to depend totally on investment bankers to come on dirt and grime . Wayne spent many hours in his garage at their country* up with the right price . Why don't the three of you put your heads together* home in Chesterton , Indiana , experimenting with various oils , cleansing* and figure out what is the minimum price that we should sell our stock for* agents , and extracts until he finally came up with what he proudly calls if we were to go public . Let's say we sell 30 million shares . I'm sure we "The perfect cleaner and polish . " It was the pure citrus oil made from can find a way of retaining control of a large portion of the shareholding* the peels of Valencia oranges that did the trick . Not only was the mixture* and still raise the much- needed cash . Billy's point of loss of control is a sweet smelling , it was an effective solvent and degreaser that worked won - good one , but I am not in favor of outsourcing production . Our success has ders on their kitchen cabinets at home ." come from our quality and that would likely be jeopardized if we let others Spurred on by their close friends . the Goodmans formed their company . produce the product . "\ Orange Brice ( which they later changed to Orange Brite International ) in Kelly , Billy , and Joey got to work . They realized that they would need* December 1995 , and look their dog- and-pony show on the road . Initially industry and competitors ' financial data . Table I presents key valuation they sold their products mainly through word - of - mouth advertising at state* data for 3 of their major publicly traded competitors in the personal and* fairs , and home and garden shows , but later , with the help of their three household products industry sector . Tables 2 and 3 present Orange Brite children , Kelly , Billy , and Joey , they used direct response television , direct* International's five - year income statements and balance sheets , respectively . Kelly preferred to use the corporate value model , where by the firm's* 38 value was estimated as the sum of its discounted free- cash flows . Free cash40] case IU what Are we Really work !" flows were estimated by subtracting the firm's net capital investment from 2015 the year's net operating profits after taxes ( NOPAI ) and were discounted 87, 290. 625 34 . 916 . 250 8. 006 , 250 52. 374 . 375.0 9. 703 . 125 95 , 296. 875 140 . 000 , 000 at a suitable risk- adjusted discount rate ( weighted average cost of capital ) . 245, 000 , 000 500 , 000. 000 255 , 000, 000 Kelly assumed that the firm's free cash flows would grow at a rate of 20%* during the first year , 10% during the second year , and finally settle down to a long-term growth rate of 6% thereafter . The firm's equity value was calculated by subtracting out the firm's outstanding debt owed to creditors Scanned with Cam Scanner from the overall value . Kelly used a risk- free rate of 4% , a market risk 2014 premium of 8% , and the average beta of the three competitors when deter - 5. 165 . 760 62 . 219.500 7. 042 . 640 24. 887 . 800 mining the firm's cost of equity .* 67. 385 , 260 37. 331 . 700. 0 141. 653 , 100 216. 081 . 009 400. 150. 009 184 . 069 . 00 Having worked on various valuation projects for a major consulting firm , Billy was a strong advocate of the use of price-ratio models for valuing* common stock . His method involved using suitable price-earnings , price - sales , price-book value , and price-cash flow multiples in conjunction with forecasted values for the firm's earnings , sales , book value , and cash flows 2013 respectively . Billy used the four- year average compounded growth rate* 1 . 876 . 865 4 . 206 , 740 23, 988. 556 147 , 122 . 500 87. 072 . 500 61. 848 . 25% 153. 127.50% 59. 97 1 . 389 35. 982, 833.5 300 , 250. 000 when forecasting the relevant variables and then discounted the year-ahead price forecasts by the required rate of return on equity ( based on the capital asset pricing model using the same inputs that Kelly used ) . Joey's finance professor , Dr. Alex Hexter , on the other hand , had indoctrinated him in the art of common stock valuation via the discounting of future dividends . " Always use a realistic required rate of return and various 2012 Orange Brite International's 5 - year Income Statements "Table ? growth rate scenarios in conjunction with industry benchmark's , when valuing* 3. 600 , 000 2 . 760. 000 4 1 , 400 , 000 72.000 , 000 38.640 , 009 108 , 000 . 000 15 , 456 , 000 1 17. 000 . 000 225, 000, 009 23, 184, 000. 0 growth companies , " was Di. Hexter's advice . Accordingly , Joey decided to use a variable growth rate model to value the firm's equity . " What will we do if our three estimates are totally different ? " Asked Kelly looking rather con - cerned . " We'll have to go back to the drawing table and examine our inputs , " said the ever-resourceful Billy , " We'll each have to be within a reasonable* 2011 ballpark , or Dad's going to flip ! " 3. 061 . 646 1 . 743 . 025 45. 315 .000 19 , 092 . 354 6.939 . 731 55 , 385 , 000 33. 231 . 000 17 . 349 , 328 100 . 700 , 009 10. 409 . 597 . 0 Table ! Key Valuation Ratios for Top 3 Competitors Shine Brite Chem Scape Ultra Clean Price / Earnings 23.6 24.6 22.8 Price / Book 7.7 12 .1 4 .2 Price / Sales 2.9 2.8 2.9 Earnings Before Interest & Taxes COGS ( excluding depreciation* Price / Cash Flow Dividend 13 16.7 14.7 Yield % 1.8 1.6 1.7 Earnings Before Taxes Operating Expenses Interest Expense* Beta 1 .2 1.3 1.15 Income Taxes Depreciation Gross Profit Net Income* Revenue OE'LS 'S Recent Price $ 62.47 $ 57. 29Case 10 What Are We Really Worth ?` 43 2015 Questions :" 64. 687. 500 13 . 343 , 750 97. 031. 250 53. 375, 000 95, 000, 000 161 , 7 18.750 161 . 7 18. 750 1 . " What are the advantages and disadvantages of going public ? I CamScanner Do you agree with Billy's concerns , or do you concur with the other members of the Goodman family regarding the issuance* of an IPO ? Explain why . 2014 2 . Comment on Kelly's preference of the corporate value model 57. 621 . 600 8. 609 , 600 70. 426. 400 85, 000, 000 128. 048, 000 34, 438. 400 128, 048, 000 Based on her approach , what would Orange Brite's selling price per share be if they were to issue 30 million shares ?" 3 . How does Kelly's price estimate compare with Billy's price Scanned " estimate based on the price-ratio models ? What are the pros and cons of Billy's preferred approach ?" 2013 3 . 128 , 108 42. 067 . 459 45. 573. 081 12. 512, 432 87. 640. 541 87. 640. 541 72,000 . 000 4 . How far off would Joey's price estimate be if he were to use a three- stage approach with growth assumptions of 30% for the first three years , followed by 20 % for the next two years . and a long - term growth assumption of 6% thereafter ? Assume that the firm pays a dividend of $1.50 per share at the end of the* Orange Brite International's 5 - year Balance Sheets first year ." Table 3 2012 39. 000. 000 4. 600. 000 52, 000. 000 75. 000, 000 36. 000. 000 18. 400. 000 75, 000. 000 5 . Based on all three estimates and on the valuation figures for the three competitors , how much per share do you think that Orange Brite is worth ? Explain your rationale . 2017 4. 329. 601 55. 666. 294 25. 000, 000 30. 616. 462 25. 049.832 55. 666. 294 26.336. 694 Total Liabilities and ( @ 14 % per year ) Owners' Equity Current Liabilities Long - Term Debt Owners' Equity Current Assets Fixed Assets Total Assets