The following are extracted from the financial statements of Frem, Inc., for 2006, 2005, and 2004. 2006
Question:
The following are extracted from the financial statements of Frem, Inc., for 2006, 2005, and 2004.
2006 | 2005 | 2004 | |
Net sales | $233,000 | $204,000 | |
Cost of sales | (124,000) | (110,000) | |
Selling and administrative expenses | (95,000) | (81,500) | |
Other income (expense): | |||
Interest | (3,700) | (3,050) | |
Other | 100 | 1,175 | |
Earnings before tax and extraordinary credit | $ 10,400 | $ 10,625 | |
Provision for income tax | (4,800) | (4,740) | |
Earnings before extraordinary credit | 5,600 | 5,885 | |
Extraordinary credit | — | 1,510 | |
$ 5,600 | $ 7,395 | ||
Total assets | $202,000 | $173,000 | $161,000 |
Current liabilities | 50,400 | 34,800 | 29,000 |
Long-term debt | 24,600 | 17,400 | 15,200 |
Total liabilities | 75,000 | 52,200 | 44,200 |
Common equity | 123,000 | 116,800 | 112,800 |
Preferred stock | 4,000 | 4,000 | 4,000 |
Total equity | 127,000 | 120,800 | 116,800 |
Total liabilities and equity | $202,000 | $173,000 | $161,000 |
What is book value in 2006? In 2005? In 2004?
Assume depreciation and amortization expense of $11,000 in 2006 and $7,000 in 2005. What is EBITDA for 2006? For 2005? Ignore the extraordinary credit in your calculations.
What multiple of EBITDA do you believe is suitable to value this business, and why?
What would you determine the value of this business to be at the end of 2006? 2005?
