Keokuk Corp. had the following operating results for 2021 & 2020. Keokuk paid dividends of $100,000 per year for both years and made capital expenditures of $45,000 in both years. The company's stock price in 2021 was $12.00 and $10.00 in 2020. In 2021, the industry average earnings multiple was 10, the free cash flow multiple was 20 and sales multiple was 2.00. The company is publicly owned and has 1,050,000 shares of outstanding stock at the end of 2021. a. Calculate the 2021 value of the company using the earnings multiple. b. Calculate the 2021 value of the company using the free cash flow multiple c. Calculate the 2021 book value of the company's equity.

Keokuk Corp. had the following operating results for 2021 & 2020. Keokuk paid dividends of $100,000 per year for both years and made capital expenditures of $45,000 in both years. The company's stock price in 2021 was $12.00 and $10.00 in 2020. In 2021, the industry average earnings multiple was 10, the free cash flow multiple was 20 and sales multiple was 2.00. The company is publicly owned and has 1,050,000 shares of outstanding stock at the end of 2021. a. Calculate the 2021 value of the company using the earnings multiple. b. Calculate the 2021 value of the company using the free cash flow multiple c. Calculate the 2021 book value of the company's equity.

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Chapter11: The Statement Of Cash Flows

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Question

a. Calculate the 2021 value of the company using the earnings multiple.

b. Calculate the 2021 value of the company using the free cash flow multiple

c. Calculate the 2021 book value of the company's equity.

24. Keokuk Corp. had the following operating results for 2021 & 2020. Keokuk paid dividends of
$100,000 per year for both years and made capital expenditures of $45,000 in both years. The
company's stock price in 2021 was $12.00 and $10.00 in 2020. In 2021, the industry average
earnings multiple was 10, the free cash flow multiple was 20 and sales multiple was 2.00. The
company is publicly owned and has 1,050,000 shares of outstanding stock at the end of 2021.
Balance Sheet, Dec 31,
2021
$ 489,350
$ 315,000
$ 225,000
$ 1,029,350
2,345,000
2020
$ 125,000
$ 400,000
$ 375,000
$ 900,000
2,350,000
Cash
Accounts Receivable
Inventory
Total Current Assets
Long-lived Assets
$ 3,374,350
$ 285,000
$ 3,250,000
$ 315,000
Total Assets
Current Liabilities
Long-term Debt
Shareholder Equity
600,000
800,000
2,135,000
2,489,350
Total Debt and Equity
$ 3,347,350
$ 3,250,000
Income Statement, for year ended Dec 31,
2020
$ 3,555,000
2,445,000
2021
Sales
$ 3,775,000
Cost of Sales
2,554,000
Gross Margin
Operating Expenses
1,221,000
1,110,000
522,000
445,000
Operating Income
699,000
244,650
655,000
232,750
Тахes
Net Income
$ 454,350
$ 432,250
Cash Flow From Operations
2021
$ 454,350
50,000
(235,000 )
( 30,000 )
2020
$ 432,250
50,000
Net Income
Plus Depreciation Expense
+ Decrease (-inc) in AccRec. and Inv.
+ Increase (-dec) in Cur. Liabl.
Cash Flow from Operations
$ 709,350
$ 482,250

Definition Definition Cash that is left over after a company has paid for its operating and capital expenses. Unlike net income or earnings, free cash flow excludes non-cash expenses of the income statement and includes the expenditures on equipment and assets. Free cash flow also helps potential shareholders to evaluate how quickly the company can pay interest and dividends.

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