Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Textbook Question
Chapter 9, Problem 26P
Suppose that In January 2006, Kenneth Cole Productions had sales of $518 million, EBITDA of $55.6 million, excess cash of $100 million, $3 million of debt, and 21 million shares outstanding.
- a. Using the average enterprise value to sales multiple in Table 9.1, estimate KCP’s share price.
- b. What range of share prices do you estimate based on the highest and lowest enterprise value to sales multiples in Table 9.1?
- c. Using the average enterprise value to EBITDA multiple in Table 9.1, estimate KCP’s share price.
- d. What range of share prices do you estimate based on the highest and lowest enterprise value to EBITDA multiples In Table 9.1?
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Suppose that in April 2019, Nike Inc. had sales of $36,367 million, EBITDA of $5,229 million, excess cash of $5,238 million, $3,804 million of debt, and 1,583.2 million shares outstanding.
a. Using the average enterprise value to sales multiple in the table here,, estimate Nike's share price.
b. What range of share prices do you estimate based on the highest and lowest enterprise value to sales multiples in the table above?
c. Using the average enterprise value to EBITDA multiple in the table above, estimate Nike's share price.
d. What range of share prices do you estimate based on the highest and lowest enterprise value to EBITDA multiples in the table above?
Data table
(Click on the following icon in order to copy its contents into a spreadsheet.)
Average
Maximum
Minimum
P
23.99
+81%
- 45%
Print
Price
Book
7.46
+ 193%
- 83%
Done
Enterprise Value
Sales
2.17
+ 96%
- 80%
Enterprise Value
EBITDA
19.98
+ 73%
- 81%
X
Suppose that in July 2022, Nike Inc. had EBITDA of $6,561 million, excess cash of $12,944 million, $12,541 million of debt, and 1,473.2 million shares outstanding.
a. Using the average enterprise value to EBITDA multiple from the table here,, estimate Nike's share price.
b. What range of share prices do you estimate based on the highest and lowest enterprise value to EBITDA multiples in the table above?
a. Using the average enterprise value to EBITDA multiple in the table, estimate Nike's share price.
Nike's share price for this case will be $ 52.78. (Round to the nearest cent.)
b. What range of share prices do you estimate based on the highest and lowest enterprise value to EBITDA multiples in the table?
The highest price will be $106.27. (Round to the nearest cent.)
Data table
TABLE 10.1
Stock Prices and
Multiples for the
Footwear Industry
(excluding Nike), July
2022
Name
Nike, Inc.
Adidas AG
Under Armour
Puma AG
Skechers U.S.A.
Wolverine World Wide
Steven Madden, Ltd.
Rocky Brands,…
Suppose that in January 2006, Kenneth Cole Productions had EPS of $1.67 and a book value of equity of $8.83 per share, a price to book ratio of 2.84 and P/E ratio 15.01.
Estimate KCP’s share price based on PE ratio.
Estimate KCP’s share price based on price to book ratio.
Chapter 9 Solutions
Corporate Finance
Ch. 9.1 - How do you calculate the total return of a stock?Ch. 9.1 - Prob. 2CCCh. 9.1 - Prob. 3CCCh. 9.2 - In what three ways can a firm increase its future...Ch. 9.2 - Under what circumstances can a firm increase its...Ch. 9.3 - How does the growth rate used in the total payout...Ch. 9.3 - Prob. 2CCCh. 9.3 - Prob. 3CCCh. 9.4 - Prob. 1CCCh. 9.4 - What implicit assumptions are made when valuing a...
Ch. 9.5 - State the efficient market hypothesis.Ch. 9.5 - Prob. 2CCCh. 9 - Assume Evco, Inc., has a current price of 50 and...Ch. 9 - Anle corporation has a current price of 20, is...Ch. 9 - Suppose Acap Corporation will pay a dividend of...Ch. 9 - Prob. 4PCh. 9 - NoGrowth Corporation currently pays a dividend of...Ch. 9 - Summit Systems will pay a dividend of 1.50 this...Ch. 9 - Prob. 7PCh. 9 - Prob. 8PCh. 9 - In 2006 and 2007, Kenneth Cole Productions (KCP)...Ch. 9 - Prob. 10PCh. 9 - Prob. 11PCh. 9 - Prob. 12PCh. 9 - Prob. 13PCh. 9 - Prob. 14PCh. 9 - Halliford Corporation expects to have earnings...Ch. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Prob. 23PCh. 9 - Prob. 24PCh. 9 - Prob. 25PCh. 9 - Suppose that In January 2006, Kenneth Cole...Ch. 9 - Prob. 27PCh. 9 - Prob. 28PCh. 9 - Prob. 29PCh. 9 - Prob. 30PCh. 9 - Prob. 31PCh. 9 - Prob. 32P
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