Consider the following balance sheet and income statement for Mmm Good Foods Incorporated (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) Mmm Good Foods Incorporated Balance Sheet 2019 Cash and short-term Investments $ 719 Accounts receivable 385 Inventory 51 Other current assets 447 Long-lived assets 4,086 Total assets $ 5,688 Current liabilities $ 1,444 Total liabilities 11,164 Noncontrolling interest Shareholders’ equity (5,476) Total liabilities and equity $ 5,688 Income Statement Sales $ 6,516 Cost of sales 3,573 Gross margin $ 2,943 Earnings before interest and taxes $ 1,640 Interest 322 Taxes 339 Income from discontinued operations 610 Net income $ 1,589 Share price $ 78 Earnings per share 5.61 Number of outstanding shares (millions) 356.5 Cash Flows Cash flow from operations $ 1,219 Capital expenditures 398 Dividends 769 Required: Determine the valuation of the company at the end of 2019 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 2019; 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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hw6 q1

Consider the following balance sheet and income statement for Mmm Good Foods Incorporated (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)

Balance Sheet	2019
	Mmm Good Foods Incorporated
Cash and short-term Investments	$ 719
Accounts receivable	385
Inventory	51
Other current assets	447
Long-lived assets	4,086
Total assets	$ 5,688
Current liabilities	$ 1,444
Total liabilities	11,164
Noncontrolling interest
Shareholders’ equity	(5,476)
Total liabilities and equity	$ 5,688
Income Statement
Sales	$ 6,516
Cost of sales	3,573
Gross margin	$ 2,943
Earnings before interest and taxes	$ 1,640
Interest	322
Taxes	339
Income from discontinued operations	610
Net income	$ 1,589
Share price	$ 78
Earnings per share	5.61
Number of outstanding shares (millions)	356.5
Cash Flows
Cash flow from operations	$ 1,219
Capital expenditures	398
Dividends	769

Required:

Determine the valuation of the company at the end of 2019 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 2019; 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.

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