Problem 5 "In February 2003 Converse, makers of the distinctive Chuck Taylor All Star high-top sneaker, were preparing for the company's initial public offering. The deal was to become the next chapter of a successful turnaround story. Following the bankruptcy of the original Converse, new owners purchased its brands at an auction. By 2002 the new Converse was thriving following its decision in 2001 to move all production from the U.S. to Asia. In the States, Converse has been busy designing lots of new styles while fostering fresh interest in Chuck Taylors and other vintage models." /Business Week/ Before Converse shares could be sold to investors in an initial public offering, investment bankers must estimate their value. What is the market value of Converse's equity based on the average P/E ratio of similar companies? Use the information in the table below. A few hints: - P0= (Market Value of Equity) / (Number of Shares Outstanding) - EPS1= Earnings1 / (Number of Shares Outstanding) P/E=P0/EPS1=( Market Value of Equity) / Earnings - Use an average P/E ratio of all companies to calculate the market value of equity of Converse. Only companies with positive earnings have meaningful P/E ratios (i.e., ignore negative P/E ratios in your calculations) Problem 5) What is the market value of Converse's equity based on the average P/E ratio of similar companies? Select one: $257 million $344 million $23 million $252 million $156 million cross out cross out cross out $0, since Converse's shares are not traded on a stock cross out exchange $150 million $376 million cross out $313 million cross out cross out