Consider the following balance sheet and income statement for Mmm Good Foods Inc. (the company that operates Tasty Fried Chicken and Pizza Party), in condensed form, including some information from the cash flow statement: (amounts are in millions)
Required:
Determine the valuation of the company at the end of 2016 using each of the following three methods. Assume earnings and cash flows for the coming 10 years are equal to the earnings and cash flows in 2016; the appropriate free cash flow multiple is 23.4. (Enter your answers in millions rounded to nearest whole number.)
a. Market capitalization.
b. Enterprise value.
c. Free cash flow multiple.
Homework Answers
| Calculation of Valueation of Company | |||
| Sl. No. | Method | Value | |
| 1 | Market capitalization Method | ||
| Share Price (1) | 73.00 | ||
| Number of outstanding Share (2) | 356.00 | ||
| Market capitalization (1)*(2) | 25,988.00 | ||
| 2 | Enterprise value Method | ||
| Market Value of Common Stock | 25,988.00 | ||
| Add : | Market Value of Preferred Equity | - | |
| Add : | Market Value of Debt | 5,618.00 | |
| Add : | Minority Interest | - | |
| Less : | Cash & Investment | (714.00) | |
| Enterprise value | 30,892.00 | ||
| 3 | Free cash flow multiple Method | ||
| Operating Cash Flow | 1,214.00 | ||
| Less : | Capital Expenditures | (414.00) | |
| Free Cash Flow Multiple | 800.00 | ||
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