In addition to footwear, Kenneth Cole Productions designs and sells handbags, apparel, and other accessories. You decide, therefore, to consider comparables for KCP outside the footwear industry. You also know the following about KCP: it has sales of $518 million, EBITDA of $55.6 million, excess cash of $100 million, $3 million of debt, EPS of $1.65, book value of equity of $12.05 per share, and 21million shares outstanding. a. Suppose that Fossil, Inc., has an enterprise value to EBITDA multiple of 10.83 and a P/E multiple of 16.97. What share price would you estimate for KCP using each of these multiples, based on the data for KCP? b. Suppose that Tommy Hilfiger Corporation has an enterprise value to EBITDA multiple of 7.72 and a P/E multiple of 16.58. What share price would you estimate for KCP using each of these multiples based on the data for KCP?

In addition to footwear, Kenneth Cole Productions designs and sells handbags, apparel, and other accessories. You decide, therefore, to consider comparables for KCP outside the footwear industry. You also know the following about KCP: it has sales of $518 million, EBITDA of $55.6 million, excess cash of $100 million, $3 million of debt, EPS of $1.65, book value of equity of $12.05 per share, and 21million shares outstanding. a. Suppose that Fossil, Inc., has an enterprise value to EBITDA multiple of 10.83 and a P/E multiple of 16.97. What share price would you estimate for KCP using each of these multiples, based on the data for KCP? b. Suppose that Tommy Hilfiger Corporation has an enterprise value to EBITDA multiple of 7.72 and a P/E multiple of 16.58. What share price would you estimate for KCP using each of these multiples based on the data for KCP?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter7: Corporate Valuation And Stock Valuation

Section: Chapter Questions

Problem 9MC

See similar textbooks

Similar questions

Moore Heel is a shoe manufacturing company. Moore has hired you to value the company based onthe discounted cash flow method. You have determined that the present value of the company’s cashflows is $400,000, marketable securities total $150,000, and the market value of debt is $250,000.What is the value of the firm?
NEED BOTH PARTS Happy Times, Incorporated, wants to expand its party stores into the Southeast. In order to establish an immediate presence in the area, the company is considering the purchase of the privately held Joe’s Party Supply. Happy Times currently has debt outstanding with a market value of $200 million and a YTM of 5.8 percent. The company’s market capitalization is $440 million and the required return on equity is 11 percent. Joe’s currently has debt outstanding with a market value of $33.5 million. The EBIT for Joe’s next year is projected to be $13 million. EBIT is expected to grow at 8 percent per year for the next five years before slowing to 3 percent in perpetuity. Net working capital, capital spending, and depreciation as a percentage of EBIT are expected to be 7 percent, 13 percent, and 6 percent, respectively. Joe’s has 2.15 million shares outstanding and the tax rate for both companies is 21 percent. a.What is the maximum share price that Happy Times should be…
Good day! Can you please help me with this? Thank you!! Financial Forecasting SOLVE THE FOLLOWING PROBLEM: Use the percentage of sales forecasting method to compute the additional financing needed by LSS Inc., if sales are expected to increase from a current level of P 20,000,000 to a new level of Php 25,000,000 over the coming year. LSS expects earnings after taxes to equal Php 1,000,000 over the next year (2018). LSS intends to pay a Php 300,000 dividend next year. The current year balance sheet for LSS is as follows: LSS INC. Balance Sheet as of December 31, 1018 Cash 1,000,000c. Additional financing needed Accounts Payable 3,000,000Accounts Receivable 1,500,000 Notes Payable 3,000,000Inventories 6,000,000 Long term Debt 2,000,000Net Fixed Assets 3,000,000 Stockholder’s Equity 3,500,000TOTAL ASSETS 11,500,000 TOTAL LIABILITIES &EQUITY 11,500,000 All assets except “cash are expected to vary proportionately with sales. Of total liabilities and equity, only “accounts payable” is…
please answer questions 1 and 2 all parts and show working and formulas where necessary. Thanks in advance. 1. Tesla has $50m in assets, which is financed with 40% debt and 60% equity. The company's beta is currently 1.25 and its tax rate is 30%. Using the Hamada equation, find Tesla's unlevered beta. 2 Firms HD and L.D each has $30m in invested capital, $8m of EBIT, a tax rate of 25%. Firm HD has a D/E ratio of 50% with an interest rate of 8% on their debt. Firm D has a debt-to capital ratio of 30%, however, pays 9% interest on their debt. Calculate the following:a. Retum on invested capital for each firmb. Return on equity for each firmc. If HD's CFO is thinking of lowering the D/E from 50% to 40%, which will lower their interest rate further from 8% to 7%, calculate the new ROE for HD.
suppose that you have started a manufacturing/Service Organization in Abu Dhabi UAE with a capital of $200,000-$800,000. You are free to assume/invest within the range of $200,000 - $800,000, depending on the size of the business. 1-you need to assume cash flows with assumed discounted rate for five years and calculate the NPV of the project. 2- Find out the BEP (Break Even Point) of your business and take necessary actions on the basis of your results.
Dollar General (DG) is choosing between financing itself with only equity or with debt and equity. Regardless of how it finances itself, the EBIT for DG will be $545.63 million. If DG does use debt, the interest expense will be $57.85 million. If DG‘s corporate tax rate is 0.30, how much will DG pay (in millions) in total to ALL investors if it uses both debt and equity? Instruction: Type ONLY your numerical answer in the unit of millions
Frozen Food Products Cost of Capital Case Assignment This case is due at the beginning of the next class period Please create 2 copies of your answers, one copy to turn in, and one copy to keep for yourself 1 Calculate the unlevered beta (bU) for each of the comparable firms that are in the same industry as Frozen Foods Products 2 Calculate the industry median unlevered beta 3 Estimate the industry discount rate (rU) using the unlevered beta 4 Calculate the operating cash flows, inc
Which of the following is a financial instrument? Select one: a. All the options b. Merchant bankers c. Banks d. Mutual Fund e. Leasing Companies Find the profitability index for Oman Clothing Company if the initial investment is 10700 OMR and the cash Inflows are as follows: Year 1 =5350 OMR; Year 2 =6400 OMR; Year 3=7450 OMR and Year 4=8500 OMR. Use discount rate as 5.05%. Select one: a. 2.27 b. 1.15 c. 2.89 d. 1.41 e. None of the options
Sub : FinancePls answer very fast.I ll upvote CORRECT ANSWER . Thank You( Dnt use CHATGPT ) If a business unit generated $3,600,000 in BEFORE TAX PROFIT and had invested capital of $18,000,000 BUT had excellent terms with its suppliers so had CREDITORS of $2,000,000 and the Weighted Average Cost of Capital (WACC) for this business is 16%. Calculate the Economic Value Add (EVA) for this business unit and select which of the following is correct. (Assume a tax rate of 30%) Positive $40,000 - performance is acceptable because EVA is greater than zero and therefore adding value b. $2,520,000 Acceptable because EVAt is greater than zero c. Negative $40,000 unacceptable because EVA is less than zero d. $2,560,000 acceptable because EVA is greater than zero
NPV, with rankings Botany Bay, Inc., a maker of casual clothing, is considering four projects. Because of past financial difficulties, the company has a high cost of capital at 15%. Which of these projects would be acceptable under those cost circumstances? Project A Project B Project C Project D Initial investment (CF0) $50,000 $100,000 $80,000 $180,000 Year (t) Cash inflows (CFt) 1 $20,000 $35,000 $20,000 $100,000 2 20,000 50,000 40,000 80,000 3 20,000 50,000 60,000 60,000 a. Calculate the NPV of each project, using a cost of capital of 15%. b. Rank acceptable projects by NPV. c. At what approximate cost of capital would all of the projects be acceptable?d. If Project A,B, C, D are independent projects, which project(s) will you propose to be implemented? e. If project A, B, C, D are mutually exclusive projects, which project will you proposed to be implemented?
Wonder Plc is considering two investment projects in another city and theestimated cash flows are as follows:Year Hotels Housing£ (m) £ (m)0 Capital outlay (200) (250) Net cash flows1 130 1302 60 1203 80 1204 100 804 Residual value 20 40The company’s cost of capital is 15%.Required: (b) Explain the importance of Payback period to the CEO.
which one is correct answer please confirm? Q6: ICU, an eyeglass manufacturer, has current assets of $800,000 and net fixed assets of $1,400,000. The firm expects its sales to climb 25 percent next year from its current level of $3,500,000. ICU's only current liability is accounts payable of $1,200,000. If both current assets and current liabilities will increase proportionately with sales, what additional financing will be needed by ICU next year? Assume ICU has a net profit margin of 6 percent. An increase in net fixed assets of $500,000 will be required. The firm pays out 50 percent of its earnings as dividends. a. $358,750 b. $178,750 c. $268,750 d. $400,000