Question

16. Corgi Corp. had the following operating results for 2020 & 2019. Corgi Corp. paid dividends of $80,000 per year for both years and made capital expenditures of $230,000 in both years. The company's stock price in 2019 was $14.20 and $12.50 in 2020. In 2020, the industry average earnings multiple was 8 and the free cash flow and sales multiples were 7 and 1.35, respectively. The company is publicly owned and has 450,000 shares of outstanding stock at the end of 2020. Balance Sheet, Dec 31, 2020 2019 Cash 397,710 $ 200,000 Accounts Receivable 209,700 $ 425,000 Inventory 409,700 300,000 Total Current Assets 1,017,110 S 925,000 Long-lived Assets 1,773,870 2,000,000 Total Assets $ 2,790,980 $ 2,925,000 Current Liabilities $ 610,445 $ 500,000 Long-term Debt 644,425 600,000 Shareholder Equity 1,536,000 1,825,000 Total Debt and Equity $ 2,790,870 $ 2,925,000 Income Statement, for year ended Dec 31, 2020 2019 Sales $ 3,800,000 $ 3,040,000 Cost of Sales 2,280,000 1,976,000 Gross Margin 1,520,000 1,064,000 Operating Expenses 912,000 533,280 Operating Income 608,000 530,720 Taxes 243,200 212,288 Net Income S 364,800 $ 318,432 Cash Flow From Operations 2020 2019 Net Income 364,800 S 318,432 Plus Depreciation Expense 165,000 165,000 + Decrease (-inc) in AccRec. and Inv. 105,600 + Increase (-dec) in Cur. Liable 110,445 Cash Flow from Operations $ 745,845 $ 483,432a. Calculate the 2020 value of the company using the earnings multiple. b. Calculate the 2020 value of the company using the free cash flow multiple c. Calculate the 2020 book value of the company's equity. d. Calculate the 2020 market value of the company. e. Compare Corgi's Equity Book Value (c.) to the Market Value (d.). Discuss conceptually (not differences in the calculations) the difference between these two amounts