Question 1:
As a securities analyst, you have been asked to review a valuation of a closely held business---Wigwam Autoparts Heaven Inc. (WAH), prepared by the Red Rocks Group (RRG) You are to give an opinion on the valuation and to support your decision by analyzing each part of the valuation. WAH's sole business is automotive retailing. The RGR valuation includes a section called "analysis of the retail autoparts Industry" based completely on the data on the attached excel spreadsheet and the following information.
- WAH and its principal competitors operate over 150 stores at year-end 1994
- The average number of stores operated per company engaged in the retail autoparts industry is 5.3
- The major customer base for autoparts sold in retail stores consists of young owners of old vehicles. These owners due there own repairs because of economic necessity
a. One of RGR's conclusions is that the retail autoparts industry as a whole is in the stabilization stage of the industry life cycle. Discuss "Three" relevant items of data from the attached excel spreadsheet that supports that conclusion.
b. Another RGR conclusion is that WAH and its principal competitors are in the growth stage of the life cycle.
Cite "Three" relevant items for the attached excel spreadsheet that supports this conclusion.
Explain how WAH and its principal competitors can be in the growth stage while their industry as a whole is in the stabilization stage.
Question 2:
You are given the following estimated per share data related to the s & P Industrials Index for the year 2010:
Sales: $1320.00
Deprecation: $58.00
Interest Expense: 28.00
You are also informed that the estimated operating margin is 0.16 and the tax rate is 32%
a. Compute the estimated EPS for 2010
b. Assume that a member of the research committee for your firm feels that it is important to consider a range of operating profit margin (OPM) estimates. Therefore you are asked to derive both optimistic and pessimistic EPS estimates using 0.15 and 0.17 for the OPM and holding everything else constant.
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1994 |
1993 |
1992 |
1991 |
1990 |
1989 |
1988 |
1987 |
1986 |
1985 |
| Population 18-29 Year old percentage change) |
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-1.8% |
-2.0% |
-2.1% |
-1.4% |
-0.8% |
-0.9% |
-1.1% |
-0.9% |
-0.7% |
-0.3% |
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| # of household w/ income more than $35,000 (% chng) |
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6.0% |
4.0% |
8.0% |
4.5% |
2.7% |
3.1% |
1.6% |
3.6% |
4.2% |
2.2% |
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| # of household w/ income less than $35,000 (% chng) |
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3.0% |
-1.0% |
4.9% |
2.3% |
-1.4% |
2.5% |
1.4% |
-1.3% |
0.6% |
0.1% |
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| 3 of cars 5-15 yeas old (% chng) |
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0.9% |
-1.3% |
-6.0% |
1.9% |
3.3% |
2.4% |
-2.3% |
-2.2% |
-8.0% |
1.6% |
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| Automotive aftermarket indstry retail sales (% chng) |
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5.7% |
1.9% |
3.1% |
3.7% |
30.0% |
2.6% |
1.3% |
0.2% |
3.7% |
2.4% |
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| Consumer expenditures on automotve prts (% chng) |
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2.4% |
1.8% |
2.1% |
6.5% |
3.6% |
9.2% |
1.3% |
6.2% |
6.7% |
6.5% |
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| Sales growth of retail autoparts comp w/ more than 100 stores |
17.0% |
16.0% |
16.5% |
14.0% |
15.5% |
16.8% |
12.0% |
15.7% |
19.0% |
16.0% |
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| Market share of retail autoparts comp w/ more than 100 stores |
19.0% |
18.5% |
18.3% |
18.1% |
17.0% |
17.2% |
17.0% |
16.9% |
15.0% |
14.0% |
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| Avrge oper margin retail autoparts comp w/ more than 100 stores |
12.0% |
11.8% |
11.2% |
11.5% |
10.6% |
10.6% |
10.0% |
10.4% |
9.8% |
9.0% |
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| Avrge oper margin of al retail autoparts companies |
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5.5% |
5.7% |
5.6% |
5.8% |
6.0% |
6.5% |
7.0% |
7.2% |
7.1% |
7.2% |
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