Question
Denver Enterprises (ticker: DE) is engaged in the business of making fine jewelry. It has been in existence for 50+ years and has always been
Denver Enterprises (ticker: DE) is engaged in the business of making fine jewelry. It has been in existence for 50+ years and has always been profitable. It currently pays an annual dividend of $2.75 per quarter that some people believe will stay the same and others believe will grow by 5% per year. Other jewelry manufacturers trade in the market for 8.5x EBITDA and/or a 16x PE ratio . The owners of DE recently appraised its fixed assets at $75mm and its intellectual property at $25mm. DE has $50mm in debt. The WACC for honey manufacturers like CBE is 15%; use this as your discount rate. It has $55mm in accounts receivable and $35mm of inventory with $30mm in accounts payable. Last year DE reported net income of $18.5mm. DE trades on NASDAQ and closed yesterday at $75. Its tax rate is 30%, and it had $1mm of depreciation and amortization. The average annual interest rate on its debt was 4%. CBE has 2.25 million shares outstanding. The book value of the fixed assets (including other long term assets and intellectual property) was $50mm. Show seven different valuations for DE. Name the one or two most relevant and the one or two least relevant measurements.
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