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Williams Company is a manufacturer of auto parts having the following financial statements for 2018-2019 Balance Sheet December 31 2019 2018 Cash Accounts receivable Inventory $ 275,000 $150,000 240,000 190,000 Total current assets 840,000 $580,e00 1,790,000 1,650,000 $2,630,000 $2,230,000 325,000 950,000 1,350,000 955,000 Total debt and equity $2,630,000 $2,230,000 165,000 400,000 Long-lived assets Total assets Current liabilities Long-term debt Shareholders' equity 380,000 900,000 Income Statement For the years ended December 31 2019 2018 Sales Cost of sales $3,650,000 $3,750,000 2,800,000 2,900,000 850,00e Gross margin 850,008 Operating expenses515,000 285,000 335,000 134,000 565,000 197,750 $ 201,000 367,250 Operating income Taxes Net income Cash Flow from Operations 2019 2018 367,250 125,000 Net income Plus depreciation expense +Decrease (-increase) in accounts receivable and inventory % 201,000 135,000 (135,000) 55,000 %256,000 Increase (-decrease) in current liabilities Cash flow from operations 492,250 Operating expenses include depreciation expense Additional financial information, including industry averages for 2019, where appropriate, includes: Industry 2019 2019 2018 Capital expenditures Income tax rate Depreciation expense Dividends Year-end stock price Number of outstanding shares Sales multiplier Free cash flow multiplier Earnings multiplier Cost of capital Accounts receivable turnover Inventory turnover Current ratio Quick ratio Cash flow from operations rati Free cash flow ratio Gross margin percentage Return on assets (net book value) Return on equity $175,000$250,000 40% 5% 35 . 0% 135,000 $ 125,000 $ 35,000 $35,000 4 1,950,000 1,950,000 3.75$ 25.00 1.50 18.00 9.00 5% 5% 11.10 10.50 2.30 1.90 1.20 1.10 30 . 0% 20 . 0% 300% 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 industryy 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 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 Answer is complete but not entirely correct. Book value of equity Market value of equity Discounted free cash flows Enterprise value Multiples-based valuation $ 1,430,000 5,947,500 512,000 6,572,500 Earnings multiple Free cash flow multiple Sales multiple 2,529,000 4,608,000 5,475,000
