Davidson Yachts is a small company founded by two businesspeople who are friends and avid sailors. At present, they are interested in expanding the business and have asked you to review its financial statements.   Davidson Yachts sells approximately 130 to 180 sailboats each year, ranging from 15-foot dinghies to 21-foot sailboats. Their sales prices range from $2,300 to more than $10,300. The company has a limited inventory of boats consisting primarily of one or two boats from each of the four manufacturers that supply Davidson. The company also sells a variety of supplies and parts and performs different types of service. Most sales are on credit.   The company operates from a large building that has offices, storage, and sales space for some of the smaller sailboats. The larger sailboats are kept in a fenced area adjacent to the main building, and an ample parking area is nearby. This year, Davidson purchased a boat lift to haul boats. The lift has brought in revenues for boat repairs, hull painting, and related services, as well as the boat hauls.   The balance sheet and income statement for Davidson Yachts for 2014–2019 follow. The increase in net fixed assets in the recent 2 years is due to improvements in the building, paving of the parking area, and the purchase of the lift.   DAVIDSON YACHTS COMPANY Comparative Balance Sheet December 31   2014   2015   2016   2017   2018   2019 Cash $ 23,560     $ 22,266     $ 19,035     $ 28,726     $ 43,992     $ 31,564   Accounts receivable   99,765       103,164       113,263       126,053       104,688       144,309   Allowance for bad debts   (9,454 )     (9,236 )     (8,974 )     (11,416 )     (7,432 )     (12,806 ) Inventory   35,309       57,114       62,152       68,274       59,294       97,104   Other current assets   12,194       13,224       9,384       11,396       19,223       23,233   Total current assets $ 161,374     $ 186,532     $ 194,860     $ 223,033     $ 219,765     $ 283,404   Property and equipment   262,495       282,308       299,680       368,865       405,569       498,926   Accumulated depreciation   (66,284 )     (93,742 )     (123,192 )     (158,399 )     (187,527 )     (227,607 ) Total assets $ 357,585     $ 375,098     $ 371,348     $ 433,499     $ 437,807     $ 554,723   Accounts payable $ 82,935     $ 78,457     $ 63,706     $ 56,646     $ 40,489     $ 50,874   Taxes payable   11,930       11,283       12,080       14,383       4,038       16,432   Short-term loans   60,176       57,280       37,883       41,393       49,894       77,262   Accrued payroll payable   5,527       4,898       3,949       4,524       5,074       5,579   Total current liabilities $ 160,568     $ 151,918     $ 117,618     $ 116,946     $ 99,495     $ 150,147   Long-term debt   158,473       172,688       179,790       215,297       229,771       262,558   Equity   38,544       50,492       73,940       101,256       108,541       142,018   Total liabilities and equity $ 357,585     $ 375,098     $ 371,348     $ 433,499     $ 437,807     $ 554,723       YACHTS COMPANY Comparative Statement of Income and Operating Cash Flow For the Years Ended December 31   2014   2015   2016   2017   2018   2019 Sales $ 769,080     $ 726,378     $ 778,980     $ 930,978       766,110       950,357   Returns and allowances   38,679       35,945       40,634       46,298       33,187       47,680   Cost of sales   474,808       442,198       458,915       546,678       454,569       531,497   Gross margin $ 255,593     $ 248,235     $ 279,431     $ 338,002     $ 278,354     $ 371,180   Depreciation expense $ 29,105     $ 27,488     $ 29,480     $ 35,237     $ 29,158     $ 40,110   Interest expense   18,627       19,587       21,028       21,505       24,919       29,023   Salaries and wages   81,953       73,694       77,876       95,794       92,933       101,477   Accounting and legal   9,454       9,236       9,353       11,864       13,138       11,410   Administration expense   79,696       75,264       80,723       96,499       88,025       97,471   Other expense   12,660       18,957       15,793       22,933       18,964       22,692   Total expense $ 231,495     $ 224,226     $ 234,253     $ 283,832     $ 267,137     $ 302,183   Net income $ 24,098     $ 24,009     $ 45,178     $ 54,170     $ 11,217     $ 68,997   Cash flow from operations (adjustments to net income)                                 Depreciation         $ 27,488     $ 29,480     $ 35,237     $ 29,158     $ 40,110   Decrease (increase) in receivables           (3,617 )     (10,361 )     (10,348 )     17,381       (34,247 ) Decrease (increase) in inventory           (21,805 )     (5,038 )     (6,122 )     8,980       (37,810 ) Decrease (increase) in other current assets           (1,030 )     3,840       (2,012 )     (7,827 )     (4,010 ) Increase (decrease) in current liabilities           (8,650 )     (34,300 )     (672 )     (17,451 )     50,652             $ 16,395     $ 28,799     $ 70,253     $ 41,458     $ 83,692       The company obtains its debt financing from two sources: (1) a small savings and loan for its short-term funds and (2) a larger commercial bank, also for short-term loans, but principally for long-term financing. The terms of the loan agreement with the bank include a restriction that Davidson’s current ratio must remain higher than 1.5.  What is the valuation of Davidson Yachts Company using the book value of equity method? What is the valuation of Davidson Yachts Company using the multiples-based method on earnings? Assume the industry average earnings multiple is 7. Use the median value of the most recent 3 years for earnings. What is the valuation of Davidson Yachts Company using the multiples-based method on operating cash flow? Assume the industry average multiple on operating cash flow is 5. Use the median value of the most recent 3 years for cash flow.