Waseca Corp. had the following operating results for 2021 & 2020. Waseca paid dividends of $1,000,000

per year for both years and made capital expenditures of $100,000 in both years. The company's stock

price in 2021 was $23.00 and $21.00 in 2020. In 2021, the industry average earnings multiple was 18, the free cash flow multiple was 22 and sales multiple was 2.10. The company is publicly owned and has

1,800,000 shares of outstanding stock at the end of 2021.

Balance Sheet, Dec 31,

2021 2020

Cash $ 1,600,000 $ 1,500,000

Accounts Receivable $ 3,000,000 $ 4,000,000

Inventory $ 2,500,000 $ 3,000,000

Total Current Assets $ 7,100,000 $ 8,500,000

Long-lived Assets 14,500,000 13,000,000

Total Assets $ 21,600,000 $ 21,500,000

Current Liabilities $ 1,200,000 $ 1,000,000

Long-term Debt 2,400,000 2,000,000

Shareholder Equity 18,000,000 18,500,000

Total Debt and Equity $ 21,600,000 $ 21,500,000

Income Statement, for year ended Dec 31,

2021 2020

Sales $ 20,000,000 $ 19,000,000

Cost of Sales 15,000,000 14,500,000

Gross Margin 5,000,000 4,500,000

Operating Expenses 2,500,000 2,100,000

Operating Income 2,500,000 2,400,000

Taxes 500,000 480,000

Net Income $ 2,000,000 $ 1,920,000

Cash Flow from Operations

2021 2020

Net Income $ 2,000,000 $ 1,920,000

Plus Depreciation Expense 750,000 750,000

+ Decrease (-inc) in AccRec. and Inv. 1,500,000 -

+ Increase (-dec) in Cur. Liabl. 200,000 -

Cash Flow from Operations $ 4,450,000 $ 2,672,000

Using the data and information from the previous page, calculate the following for Waseca Corp.

a. Calculate the 2021 value of the company using the earnings multiple.

b. Calculate the 2021 value of the company using the free cash flow multiple.

c. Calculate the 2021 book value of the company's equity.

d. Calculate the 2021 market value of the company.

e. Compare Waseca's Equity Book Value (c.) to the Market Value (d.). Discuss conceptually (not differences in the numerical calculations) the difference between these two amounts.