KOHLER as a private firm which has two divisions: kitchen and bath division constitutes 40% of KOHLERS assets, and power systems division constitute 60% of KOHLERs assets. Comparables for kitchen and bath divisions are AS and AW. Comparables for power systems division are BS, CM, and DD.

Selected financial data about comparable companies and kohLER (and millions)

American American briggs& cummins Detroit kohler

Standard woodmark Stratton engine diesel corp.

Ticker AS AW BS CM DD KH

MV equity 3500 2400 2000 2800 3200 NA

Debt 1500 1200 800 1000 1500 500

Sales 7500 4000 4800 2000 6400 3200

Depreciation 600 400 1000 400 150 60

Operating costs 2500 1200 1000 1100 1200. 1500

Shares outstanding(M) 25 12 16 10 20 12

1. Estimate the total firm value and stock value of KOHLER, using sales multiples and NOPAT multiples. Assume tax rate is 25% for all firms.
2. CEO thinks that discounted free cash flow model often produces more accurate valuation then comparables model. Do you agree? (no need for calculations, 1-3 sentences.)

C. CEO thinks that firms Capital structures will affect your evaluation with multiples (comparables) model. What would you suggest a CEO to do? (no need for calculations, 1-3 sentences.)