Valuation Using Income Statement Multiples

The following table provides summary data for Target and its competitors, Kohl's and Wal$-$Mart.

$($in millions$)$ Target Kohl's Wal$-$Mart

Company assumed value $--$ $$22,098$ $$252,306$

Equity assumed value $--$ $$21,470$ $$213,288$

NOPAT $$3,179$ $$1,152$ $$13,354$

Net income $$2,767$ $$1,109$ $$12,178$

Net nonoperating obligations $($assets$)$ $$10,109$ $$628$ $$39,018$

Common shares outstanding $860$ shares $321$ shares $41$ shares

$($a$)$ Compute the price to NOPAT ratio for both Kohl's and Wal$-$Mart.

$($Round your answers to two decimal places.$)$

Kohl's Answer

$19\mathrm{.}2$

Wal$-$Mart Answer

$18\mathrm{.}89$

$($b$)$ Use Kohl's and Wal$-$Mart as comparables, along with the company value to NOPAT ratios from part $($a$),$ and then estimate for Target its company intrinsic value, its equity intrinsic value, and its equity intrinsic value per share.

Round the intrinsic value and equity intrinsic value to the nearest million and the value per share to the nearest cent.

Average of the two rounded ratios in $($a$)$ above

Answer

$19\mathrm{.}05$

$($Round to two decimal places.$)$

Use your rounded answer above to calculate the following:

Intrinsic value $Answer

$60,681$

million

Equity intrinsic value $Answer

$50,572$

million

Equity intrinsic value per share $Answer

$58\mathrm{.}74$

$($c$)$ Compute the price to net income ratio for both Kohl's and Wal$-$Mart.

Round your answers to two decimal places.

Kohl's Answer

$19\mathrm{.}95$

Wal$-$Mart Answer

$20\mathrm{.}7$

$($d$)$ Use Kohl's and Wal$-$Mart as comparables, along with the equity to net income ratios from part $($c$),$ and then estimate for Target its equity intrinsic value and its equity intrinsic value per share.

Round the equity intrinsic value to the nearest million and the value per share to the nearest cent.

Average of the two rounded ratios in $($c$)$ above

Answer

$20\mathrm{.}33$

$($Round to two decimal places.$)$

Use the rounded average calculated above to calculate the following:

Equity intrinsic value $Answer

$56,238$

Equity intrinsic value per share $Answer