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If anyone can help me ASAP, really appreciate it Question 3: (1) Stryker Inc. is an American farm equipment firm with a financing business. In

If anyone can help me ASAP, really appreciate it

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Question 3: (1) Stryker Inc. is an American farm equipment firm with a financing business. In the most recent year, the firm reported the following breakdown of key operating items (in millions): Farm Equipment Financing Entire firm Sales $10,000 $2,000 $12,000 EBITDA $1,500 $650 $2, 150 EBIT $1,000 $650 $1,650 Net Income $400 $100 $500 BV of equity $3,000 $1,000 $4,000 BV of Debt $2,000 $3,000 $5,000 Cash $500 $500 $1,000 Cost of % 8% equity 8.80% Cost of 7.50% capital 6.20% 7.00% The company faces a 40% tax rate and is in stable growth, growing 3% a year. You have run a regression for the EV/EBITDA multiple across just farm equipment companies: EV/EBITDA = 3.5 + 26.5 (After-tax return on capital) + 41.3 (Expected growth) -31.5 (Cost of capital) You also have a regression of Price to Book equity ratios across financial service firms: P/BV = 0.70 + 9.0 (Return on equity) - 5.0 (Cost of equity) The firm has 800 million shares outstanding. Estimate the value of equity per share in the firm, using relative valuation. (All percentages are entered as decimals in the regression. Thus, 15% would be 0.15) (50 marks) (2) a. What are arguments in favour of using sector-specific multiples? (20 marks) b. When do sector-specific multiples work best? (20 marks) c. Why do multiples generally have skewed distributions? (10 marks)

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