Corporate Finance Plus MyLab Finance with Pearson eText -- Access Card Package (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
4th Edition
ISBN: 9780134408897
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 9, Problem 27P
In addition to footwear, Kenneth Cole Productions designs and sells handbags, apparel, and other accessories. You decide, therefore, to consider comparables for KCP outside the footwear industry.
- a. Suppose that Fossil, Inc., has an enterprise value to EBITDA multiple of 9.73 and a PIE multiple of 18.4. What share price would you estimate for KCP using each of these multiples, based on the data for KCP in Problems 25 and 26?
- b. Suppose that Tommy Hilfiger Corporation has an enterprise value to EBITDA multiple of 7.19 and a PIE multiple of 17.2. What share price would you estimate for KCP using each of these multiples, based on the data for KCP In Problems 25 and 26?
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Dengar
Compare and contrast the decisions that are consistent with the firm’s share price maximization goals. In your response, provide at least two peer-reviewed sources to support your answers. As we have discussed, one of the main goals of the organization is to maximize the profits in the organization to increase the firm’s share price. Consider your own organization or a previous organization, what goals were set to maximize the profits? Did these goals come at the “cost” of other important goals for the organization? Discuss your experiences.
Suppose you, a stock analyst, are performing a ratio analysis and comparing a discount merchandiser with a high-end merchandiser. Suppose further that both companies have identical ROEs. If you apply the DuPont equation to both firms, would you expect the three components to be the same for both companies? If not, explain what balance sheet and income statement items might lead to the differences in the DuPont equation components.
Chapter 9 Solutions
Corporate Finance Plus MyLab Finance with Pearson eText -- Access Card Package (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
Ch. 9.1 - How do you calculate the total return of a stock?Ch. 9.1 - Prob. 2CCCh. 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 - Canadian-based mining company EI Dorado Gold (EGO)...Ch. 9 - In 2006 and 2007, Kenneth Cole Productions (KCP)...Ch. 9 - DFB, Inc., expects earnings at the end of this...Ch. 9 - Cooperton Mining just announced it will cut its...Ch. 9 - Procter and Gamble (PG) paid an annual dividend of...Ch. 9 - Colgate-Palmolive Company has just paid an annual...Ch. 9 - Prob. 14PCh. 9 - Halliford Corporation expects to have earnings...Ch. 9 - Prob. 16PCh. 9 - Maynard Steel plans to pay a dividend of 3 this...Ch. 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 - In addition to footwear, Kenneth Cole Productions...Ch. 9 - You read in the paper that Summit Systems from...Ch. 9 - Prob. 31PCh. 9 - Prob. 32PCh. 9 - Prob. 33P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- ECON: Industrial Organization 1. Suppose firms’ market shares in the US mobile services market are as follows: AT&T 44.5%, Verizon 29.5%, T-Mobile 24.9%, and US Cellular 1.1%. What is the HHI for this market?arrow_forwardGenevieve Co, and Odessa Co. sell the same product in a competitive industry. Thus the selling price of the product for each company is the same. Other data about the two companies are as follows: *arrow_forwardProjecting profi t margins into the future on the basis of past results would be most reliablewhen the company:A . is in the commodities business.B . operates in a single business segment.C . is a large, diversifi ed company operating in mature industries.arrow_forward
- Google Inc. is a technology company specializing in Internet-related products and services, including its famous web search engine. Whirlpool Corp. manufactures home appliances including laundry appliances, refrigerators, and dishwashers. Google has a market - to - book ratio of 3.8. Based on your knowledge of the industries in which these two companies compete, and the determinants of the M/B ratio, would you estimate that Whirlpool's market-to - book ratio is O A. less than Google's M/B ratio of 3.8 O B. approximately equal to Google's M/B ratio of 3.8 O C. greater than Google's M/B ratio of 3.8arrow_forwardCOMPUTING RESIDUAL INCOME.Suppose the following hypothetical data represent total assets, book value, and market value of common shareholders’ equity (dollar amounts in millions) for three firms. Each of these firms, Southwest Airlines, Kroger, and Yum! Brands, operates in a different industry, but all of them operate in very competitive industries. Southwest Airlines is a U.S. domestic airline that provides low-cost point-to-point air transportation services. Kroger operates retail supermarkets across the United States. Yum! Brands operates and franchises quick-service restaurants, including KFC, Pizza Hut, Taco Bell, Long John Silver’s, and A&W All American Food restaurants. These data also include hypothetical market betas for the three firms and analysts’ consensus forecasts of net income for Year +1. For each firm, analysts expect other comprehensive income items for Year +1 to be zero, so Year +1 net income and comprehensive income will be identical. Assume that the risk-free…arrow_forwardHelp with the realtionship between financial leverage and profitability. Pelican Paper, Inc., and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some financial statement values for each company follow. Use them in a ratio analysis that compares the firms' financial leverage and profitability. a. Calculate the following debt and coverage ratios for the two companies. Discuss their financial risk and ability to cover the costs in relation to each other. (1) Debt ratio (2) Times interest earned ratio b. Calculate the following profitability ratios for the two companies. Discuss their profitability relative to each other. (1) Operating profit margin (2) Net profit margin (3) Return on total assets (4) Return on common equity c. In what way has the larger debt of Timberland Forest made it more profitable than Pelican Paper? What are the risks that Timberland's investors undertake when they choose to purchase its stock instead of Pelican's?arrow_forward
- The total cost formula for a company can be modeled by TC = 12570+ 50x where x represents the number of items sold. A formula for the company's total income is modeled with TR 80x, where a represents the number of items sold. This company will breakeven when its total costs equal its total income. - How many items must this company sell to breakeven? Answer:arrow_forwardProfit margins and turnover ratios vary from one industry to another. What differenceswould you expect to find between the turnover ratios, profit margins, and DuPont equationsfor a grocery chain and a steel company?arrow_forwardEach of the following factors affects the weighted average cost of capital (WACC) equation. Which of the following factors are outside a firm’s control? Check all that apply. Tax rate The inflation rate The firm’s dividend payout ratio The impact of a firm’s cost of capital on managerial decisions Consider the following case: Acme Manufacturing Corporation has two divisions, L and H. Division L is the company’s low-risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division H is the company’s high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division L is considering a project with an expected return of 9.5%. Should Acme Manufacturing Corporation accept or reject the project? Reject the project…arrow_forward
- Question:1) You are expected and required to comment/analyze specifically the following aspects on These three Companies Artistic Denim Mills Ltd, Faisal Spinning Millis Ltd. And the Feroze 1888 Mills Ltd.i) Chosen companies leverage.ii) Debt management.iii) DuPont variants i.e., profitability, asset efficiency, and leverage.4) Also draw strength from market intelligence, if, you have or are able to obtain about the chosen companies(s) and is worth explanation. Such information typically may include major expansion project initiated during the last two yearsarrow_forwardsee attached Westfield Capital Management Co.’s equity investment strategy is to invest in companies with low price-to-book ratios, while considering differences in solvency and asset utilization. Westfield is considering investing in the shares of either Jerry’s Departmental Stores ( JDS) or Miller Stores (MLS). Selected financial data for both companies follow: Required: ComputeeachofthefollowingratiosforbothJDSandMLS: (1) Price-to-bookratio(2) Total-debt-to-equityratio(3) Fixed-asset-utilization(turnover) Select the company that better meets Westfield’s criteria.arrow_forwardThe relationship between financial leverage and profitability Pelican Paper, Inc., and Timberland Forest, Inc., are rivals in the manufacture of craft papers. Some financial statement values for each company follow. Use them in a ratio analysis that compares the firms' financial leverage and profitability. a. Calculate the following debt and coverage ratios for the two companies. Discuss their financial risk and ability to cover the costs in relation to each other. (1) Debt ratio (2) Times interest earned ratio b. Calculate the following profitability ratios for the two companies. Discuss their profitability relative to each other. (1) Operating profit margin (2) Net profit margin (3) Return on total assets (4) Return on common equity c. In what way has the larger debt of Timberland Forest made it more profitable than Pelican Paper? What are the risks that Timberland's investors undertake when they choose to purchase its stock instead of Pelican's? a. The debt ratio for Pelican is %.…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781305635937Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...FinanceISBN:9781285065137Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781305635937
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Fundamentals of Financial Management, Concise Edi...
Finance
ISBN:9781285065137
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Dividend disocunt model (DDM); Author: Edspira;https://www.youtube.com/watch?v=TlH3_iOHX3s;License: Standard YouTube License, CC-BY