Assume GAAP (not IFRS). Please estimate the value of ABM Corp. following the sum of parts approach.

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Question:

ABM Corp. itself (consolidated financial statement):

EBIT = $500M

Capital Invested = $2,000M

Total debt outstanding = $500M

Cash holdings of $300M

Cash adjusted cost of capital = 10%

In a stable growth stage with a 5% growth rate in EBIT

Tax rate = 40%

Subsidiaries information:

70% holdings of PLC
- $100M EBIT, $500M Capital Invested, $200M debt, and $100M cash
- A public firm with MV of equity of $1 Billion
30% holdings of BBC
- $100M debt and $50M cash
- A private firm with an estimated MV of equity of $500M
20% holdings of STR.
- $200M debt and 100M cash
- A public firm with MV of equity of $700 Million

Use cash-adjusted ROC and apply a 20% discount on minority holdings’ value. You can use no discount and no premium for cash value.