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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. X Answer is complete but not entirely correct. Book value of equity $ 1,343,000 Market value of equity 5,734,000 Discounted free cash flows 82,667 x Enterprise value 6,366,000 Multiples-based valuation Earnings multiple 2,410,200 Free cash flow multiple 2,282,400 Sales multiple 5,370,000Williams Company is a manufacturer of auto parts having the following financial statements for 2018-2019. Balance Sheet December 31 2019 2018 Cash 268, 900 143, 000 Accounts receivable 158, 000 233,060 Inventory 393,000 183, 900 Total current assets $ 819, 000 559, 000 Long-lived assets 1, 720,000 1, 580, 000 Total assets $2, 539,000 $2, 139, 900 Current liabilities 296,060 255,060 Long-term debt 900, 000 880,000 Shareholders' equity 1, 343, 000 1, 004, 000 Total debt and equity $2,539, 000 $2, 139, 900 Income Statement For the years ended December 31 2019 2018 Sales $3, 580, 000 $3, 680,000 Cost of sales 2, 660,000 2,760,000 Gross margin 20,000 20,000 Operating expenses* 508, 000 362, 000 Operating income 412, 000 558, 000 Taxes 144, 200 195,300 Net income $ 267, 800 $ 362,700 Cash Flow from Operations 2019 2018 Net income $ 267, 800 $ 362, 700 Plus depreciation expense 100, 000 90,600 + Decrease (-increase) in accounts receivable and inventory (135, 000) + Increase (-decrease) in current liabilities 41, 000 Cash flow from operations $ 273, 800 $ 452, 700*Operating expenses include depreciation expense. Additional financial information, including industry averages for 2019, where appropriate, includes: Miss-tr\"; _, . _ 2319. 2313-. 2919. Capital expenditures 5 165,666 5 186,666 Income tax rate 35% 35% 35.6% Depreciation expense 5 166,666 $ 96,666 Dividends $ 42,666 $ 42,666 Yearend stock price $ 3.65 $ 4- 25.66 Number of outstanding shares 1,886,666 1,886,666 Sales multiplier 1.56 Free cash flow multiplier 18.66 Earnings multiplier 9.66 Cost of capital 5% 5% Accounts receivable turnover 11.16 Inventory turnover 16.56 Current ratio 2.36 Quick ratio 1.96 Cash flow from operations ratio 1.26 Free cash flow ratio 1.16 Gross margin percentage 36.6% Return on assets (net book value) 26.6% Return on equity 36.6% ' 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 {DEF}, [4i 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 indenitely at the amount in 20T9
