Valuation Using Income Statement Multiples The following table provides summary data for Target and its competitors, Kohl's and Wal-Mart. (in millions) Target Kohl's Wal-Mart Company assumed value -- $13,487 $322,123 Equity assumed value -- $10,922 $272,541 NOPAT $3,260 $980 $8,312 Net income $2,937 $801 $6,670 Net nonoperating obligations (assets) $11,340 $2,565 $49,582 Common shares outstanding 510.9 shares 159.0 shares 2,844.0 shares (a) Compute the price to NOPAT ratio for both Kohl's and Wal-Mart. Kohl's Answer Wal-Mart Answer (b) Use Kohl's and Wal-Mart as comparables, along with the company value to NOPAT ratios from part (a), and then estimate for Target its company intrinsic value, its equity intrinsic value, and its equity intrinsic value per share. Round the intrinsic value and equity intrinsic value to the nearest million and the value per share to the nearest cent. Use your rounded answer above to calculate the following: Intrinsic value Equity intrinsic value Equity intrinsic value per share (c) Compute the price to net income ratio for both Kohl's and Wal-Mart. Round your answers to two decimal places. Kohl's Answer Wal-Mart Answer (d) Use Kohl's and Wal-Mart as comparables, along with the equity to net income ratios from part (c), and then estimate for Target its equity intrinsic value and its equity intrinsic value per share. Round the equity intrinsic value to the nearest million and the value per share to the nearest cent. Use the rounded average calculated above to calculate the following: Equity intrinsic value Equity intrinsic value per share
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
Valuation Using Income Statement Multiples
The following table provides summary data for Target and its competitors, Kohl's and Wal-Mart.
| (in millions) | Target | Kohl's | Wal-Mart |
|---|---|---|---|
| Company assumed value | -- | $13,487 | $322,123 |
| Equity assumed value | -- | $10,922 | $272,541 |
| $3,260 | $980 | $8,312 | |
| Net income | $2,937 | $801 | $6,670 |
| Net nonoperating obligations (assets) | $11,340 | $2,565 | $49,582 |
| Common shares outstanding | 510.9 shares | 159.0 shares | 2,844.0 shares |
(a) Compute the price to NOPAT ratio for both Kohl's and Wal-Mart.
Kohl's Answer
Wal-Mart Answer
(b) Use Kohl's and Wal-Mart as comparables, along with the company value to NOPAT ratios from part (a), and then estimate for Target its company intrinsic value, its equity intrinsic value, and its equity intrinsic value per share.
Round the intrinsic value and equity intrinsic value to the nearest million and the value per share to the nearest cent.
Use your rounded answer above to calculate the following:
Intrinsic value
Equity intrinsic value
Equity intrinsic value per share
(c) Compute the price to net income ratio for both Kohl's and Wal-Mart.
Round your answers to two decimal places.
Kohl's Answer
Wal-Mart Answer
(d) Use Kohl's and Wal-Mart as comparables, along with the equity to net income ratios from part (c), and then estimate for Target its equity intrinsic value and its equity intrinsic value per share.
Round the equity intrinsic value to the nearest million and the value per share to the nearest cent.
Use the rounded average calculated above to calculate the following:
Equity intrinsic value
Equity intrinsic value per share
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