Question

Problem 10-18 Suppose that in July 2013, Nike had sales of $25,313 million, EBITDA of $3,254 million, excess cash of $3,337 million, $1,390 million of debt, and 893.6 million shares outstanding. Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given a. Using the average enterprise value to sales multiple in Table 10.1, estimate Nike's share price. b. What range of share prices do you estimate based on the highest and lowest enterprise value to sales multiples in Table 10.12 c. Using the average enterprise value to EBITDA multiple in Table 10.1, estimate Nike's share price. d. What range of share prices do you estimate based on the highest and lowest enterprise value to EBITDA multiples in Table 10.12 Table 10.1 Name Nike, Inc. Adidas AG Puma AG Wolverine World Wide Steven Madden, Ltd. Deckers Outdoor Corp. Crocs, Inc. Skechers U.S.A. Weyco Group R. G. Barry Corp. Rocky Brands, Inc. Market Cap ($ million) 55,970 23,105 4,330 2,910 2,320 1,990 1,470 1,340 301 197 113 Enterprise Value ($ million) 54,023 23,317 4,085 3,981 2,140 1,923 1,240 1,213 325 174 132 Average P/E 23.29 32.33 70.56 37.60 18.40 16.74 11.46 67.41 16.53 14.92 12.46 29.84 Price/Book 5.07 3.06 1.96 4.13 3.68 2.67 2.40 1.54 1.71 2.31 0.89 2.44 Enterprise Value/Sales 2.03 1.20 0.96 1.22 1.74 1.36 1.10 0.78 1.11 1.19 0.58 1.12 Enterprise Value/ EBITDA 15.71 11.88 9.34 9.28 10.70 8.73 6.74 18.16 9.69 6.44 6.61 9.76 All Ratios as of July 2013 Sales (million) EBITDA (million) Cash (million) Debt (million) Shares (million) 25,313 3,254 3,337 1,390 893.6 a. Using the average enterprise value to sales multiple in Table 10.1, estimate Nike's share price. Enterprise value (million) Share price estimate b. What range of share prices do you estimate based on the highest and lowest enterprise value to sales multiples in Table 10.1? Highest EV to Sales Lowest EV to Sales Highest share price estimate Lowest share price estimate c. Using the average enterprise value to EBITDA multiple in Table 10.1, estimate Nike's share price. million Enterprise value (million) Share price estimate d. What range of share prices do you estimate based on the highest and lowest enterprise value to EBITDA multiples in Table 10.1? Highest EV to EBITDA Lowest EV to EBITDA Highest share price estimate Lowest share price estimate

Please help solve blue boxes. All information is given. Help solve using excel.

Answer 1

Solution:

Summary:

a. (i) Enterprise Value (Mn) = $ 51,385.39 Mn

a. (ii) Share Price Estimate = $ 59.68

b. (i)  Highest Enterprice Value to Sales = 2.13

b. (ii)  Lowest Enterprice Value to Sales = 2.03

I . The values provided in the Qs:

(Mn- Million)

Sales= $ 25,313 Mn

EBITA= $ 3254 Mn

Cash = $ 3337 Mn

Debt= $1390 Mn

Shares Outstanding= $ 893.6 Mn

II . Formula's Used:

1. Enterprise Value to Sales= Enterprise Value/ Sales

2. Enterprise Value = Market Capitalisation + Debt - Cash & Cash Equivalent

III. Using Values provided in the Question:

a. (i) Enterprise Value (Million)

Giv =>

Average Enterprise Value to Sales Multiple = 2.03 (Tab 10.3)

Sales= $ 25,313 Mn

Enterprise Value / Sales = 2.03

Therefore , Enterprise Value = 2.03 * 25,313

=51,385.39 Mn

(ii) Share Price Estimate

Enterprise Value = Market Capitalisation + Debt - Cash & Cash Equivalent

51,385.39 = Market Capitalisation + 1390 - 3337

Market Capitalisation = 53,332.39

$\div$ Nos. of Shares = 893.6

Therefore, Share Price Estimate = $ 59.68

b.

(i) Highest Enterprice Value to Sales

Giv in Table 10.3 => Enterprise Value = $ 54,023 Mn

Sales => $ 25,313 Mn

Highest Enterprise Value / Sales = 54,023 / 25,313

= 2.13

(i) Lowest Enterprice Value to Sales

Giv in Table 10.3 => Enterprise Value / Sales = 2.03

Summary:

a. (i) Enterprise Value (Mn) = $ 51,385.39 Mn

a. (ii) Share Price Estimate = $ 59.68

b. (i)  Highest Enterprice Value to Sales = 2.13

b. (ii)  Lowest Enterprice Value to Sales = 2.03

Note:

1. Due to mulitple subparts, we are subject to a maximum of the first 4 subparts. Hence, remaning subparts not answered.

2. Excel answer are not possible, hence typed answers are given.