Lon Jenkins is the sole finance person at Digital Widget, Inc., a closely held firm where he has worked for the past four years.

The family that controls the company has asked Lon to value the DW stock. He tried using free cash flow and dividend growth models but dismissed the results as not being useful due to recent investments and changes in operations.

Lon has asked that you undertake a Market Multiple Valuation Method appraisal to determine DW's value. He believes that EPS might be part of the key to making this work. Lon's assistant has compiled the information in an Excel worksheet. Compare Digital Widget to the compiled firms.

Using Excel and providing formulas:

a). Analyze the data

b). Calculate EPS

c). Which firms would you exclude from the analysis?

 

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Digitial Widget, Inc.--A Market Model Valuation Problem Digital Widget, Inc. (DGI) Net Sales EBIT Net Income (Other Information) Common Dividends Paid Added to Retained Earnings Tax Rate WACC Shares of common stock outstanding Enter DGI Information Net Sales EBIT Net Income Other Information Common dividends paid Added to retained earnings Tax Rate WACC Shares of stock Share Price Company A 27,104,000 5,962,880 1,908,122 1,200,000 708,122 35% 20.32% 1,000,000 7.83 $ $ $ $ $ 27,398,000 3,120,000 1,560,000 400,000 1,160,000 40.00% 11.50% 750,000 Company B 31,716,000 3,805,920 1,712,664 1,200,000 512,664 41% 14.20% 1,200,000 25.00 Company C 279,986,000 55,997,200 20,158,992 16,000,000 4,158,992 44% 6.80% 8,000,000 34.33 Company D 24,551,000 2,700,610 1,350,305 600,000 750,305 40% 12.00% 1,200,000 8.40 Company E 88,456,000 13,268,400 7,297,620 6,400,000 897,620 42% 9.75% 3,200,000 28.57 Company F 12,478,000 499,120 (500,880) 100,000 (600,880) -15% 16.07% 1,000,000 0.37 Company G 28,019,000 3,222,185 1,675,536 800,000 875,536 39% 11.25% 800,000 14.29 Digitial Widget, Inc.--A Market Model Valuation Problem Digital Widget, Inc. (DGI) Net Sales EBIT Net Income (Other Information) Common Dividends Paid Added to Retained Earnings Tax Rate WACC Shares of common stock outstanding Enter DGI Information Net Sales EBIT Net Income Other Information Common dividends paid Added to retained earnings Tax Rate WACC Shares of stock Share Price Company A 27,104,000 5,962,880 1,908,122 1,200,000 708,122 35% 20.32% 1,000,000 7.83 $ $ $ $ $ 27,398,000 3,120,000 1,560,000 400,000 1,160,000 40.00% 11.50% 750,000 Company B 31,716,000 3,805,920 1,712,664 1,200,000 512,664 41% 14.20% 1,200,000 25.00 Company C 279,986,000 55,997,200 20,158,992 16,000,000 4,158,992 44% 6.80% 8,000,000 34.33 Company D 24,551,000 2,700,610 1,350,305 600,000 750,305 40% 12.00% 1,200,000 8.40 Company E 88,456,000 13,268,400 7,297,620 6,400,000 897,620 42% 9.75% 3,200,000 28.57 Company F 12,478,000 499,120 (500,880) 100,000 (600,880) -15% 16.07% 1,000,000 0.37 Company G 28,019,000 3,222,185 1,675,536 800,000 875,536 39% 11.25% 800,000 14.29

Answer rating: 100% (QA)

a To analyze the data first calculate the Average Market Capitalization AVGMC by taki... View the full answer