Question: D15-45. Valuation Using Income Statement Multiples The following table provides summary data for Guess? Inc. and its competitors, Ralph Lauren Corp. and The Gap Inc..

D15-45. Valuation Using Income Statement 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 Gap Company assumed value. . . . . . . . . . . . . . . . . . . . . . . — $ 9,215 $15,001 Equity assumed value . . . . . . . . . . . . . . . . . . . . . . . . . — $10,328 $15,265 Net operating profit after tax . . . . . . . . . . . . . . . . . . . . $ 184 $ 768 $ 1,195 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 181 $ 750 $ 1,135 Net nonoperating obligations (assets) . . . . . . . . . . . . . $(321) $ (1,113) $ (264)
Common shares outstanding. . . . . . . . . . . . . . . . . . . . 85.4 shares 61 shares 463 shares Required

a. Compute the price to NOPAT ratio for both Ralph Lauren and Gap.

b. Use Ralph Lauren and Gap as comparables, along with the price to NOPAT 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 price to net income ratio for both Ralph Lauren and Gap.

d. Use Ralph Lauren and Gap as comparables, along with the price to net income ratios from part

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

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