1. MarineCo manufactures, marks, and distributes recreational motor boats. Using discounted free cash flow, you value the company's operations at $2,500 million. The company has a 20 percent stake in a nonconsolidated subsidiary. The subsidiary is valued at S500 million. The investment is recorded on MarineCo's balance sheet as an equity investment of $50 million. MarineCo is looking to increase its ownership.
The company's marginal tax rate is 30 percent. Based on this information, what is MarineCo's enterprise value? If new management announced its plan to sell the company's stake in the subsidiary at its current value, how would that change your valuation?
2. You decide to value a steady-state company using probability-weighted scenario analysis. In Scenario 1, NOPLAT is expected to grow at 6 percent and ROTC equals 16 percent. In Scenario 2, NOPLAT is expected to grow at 2 percent and ROTC equals 8 percent Next year's NOPLAT is expected to equal $100 million and the weighted average cost of capital is 10 percent. Using the key value driver formula introduced in Chapter 2, what is the enterprise value in each scenario? If each scenario is equally likely, what is the enterprise value for the company?
1. Exhibit presents market and profit data for three companies. Using this data, compute enterprise-value-to-EBITDA and enterprise-value-to-EBITA for Companies 1 and 2. Is the net difference between Company 1 and Company 2 the same for both ratios? If not, why might this be?
2. Exhibit presents market and profit data for three companies. If Company 3 has nonoperating assets valued at $50 million, what are the
| Multiples Analysis: Market and Profit Data |
|
|
| $million |
|
|
|
|
|
|
Company 1 |
Company 2 |
Company 3 |
|
Market data |
|
|
|
|
Share price(dollars) |
25 |
16 |
30 |
|
Shares outstanding(million) |
5 |
8 |
15 |
|
|
|
|
|
|
Short-term debt |
25 |
15 |
30 |
|
Long term debt |
50 |
70 |
40 |
|
|
|
|
|
|
Operating Profit |
|
|
|
|
EBITDA |
25 |
30 |
58 |
|
EBITA |
22 |
23 |
61 |
company's appropriate enterprise-value-to-EBITDA and enterprise-value-to-EBITA multiples?