Question: D15-44. Valuation Using Balance Sheet Multiples The following table provides summary data for Guess? Inc. and its competitors, Ralph Lauren Corp. and The Gap Inc..

D15-44. Valuation Using Balance Sheet Multiples The following table provides summary data for Guess? Inc. and its competitors, Ralph Lauren Corp.
and The Gap Inc..
(in millions) Guess? Ralph Lauren The Gap Company assumed value. . . . . . . . . . . . . . . — $ 9,215 $15,001 Equity assumed value . . . . . . . . . . . . . . . . . — $10,328 $15,265 Net operating assets . . . . . . . . . . . . . . . . . . $ 766 $ 2,672 $ 2,630 Book value of equity. . . . . . . . . . . . . . . . . . . $1,087 $ 3,785 $ 2,894 Net nonoperating obligations (assets) . . . . . $ (321) $ (1,113) $ (264)
Common shares outstanding. . . . . . . . . . . . 85.4 shares 61.0 shares 463.0 shares Required

a. Compute the price to net operating assets ratio for both Ralph Lauren and Gap.

b. Use Ralph Lauren and Gap as comparables, along with the price to NOA ratios from part

a, and then estimate for Guess? its company intrinsic value, its equity intrinsic value, and its equity intrinsic value per share.

c. Compute the PB ratio for both Ralph Lauren and Gap.

d. Use Ralph Lauren and Gap as comparables, along with the PB ratios from part

c, and then estimate for Guess? its equity intrinsic value and its equity intrinsic value per share.

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