The following information is computed from Fast Food Chains annual report for 2006. 2006 2005 Current assets
Question:
The following information is computed from Fast Food Chain’s annual report for 2006.
2006 2005
Current assets | $ 2,731,020 | $ 2,364,916 |
Property and equipment, net | 10,960,286 | 8,516,833 |
Intangible assets, at cost | ||
less applicable amortization | 294,775 | 255,919 |
$13,986,081 | $11,137,668 | |
Current liabilities | $ 3,168,123 | $ 2,210,735 |
Deferred federal income taxes | 160,000 | 26,000 |
Mortgage note payable | 456,000 | — |
Stockholders' equity | 10,201,958 | 8,900,933 |
$13,986,081 | $11,137,668 | |
Net sales | $33,410,599 | $25,804,285 |
Cost of goods sold | (30,168,715) | (23,159,745 |
Selling and administrative expense | (2,000,000) | (1,500,000) |
Interest expense | (216,936) | (39,456) |
Income tax expense | (400,000) | (300,000) |
Net income | $ 624,948 | $ 805,084 |
What is book value in 2006? In 2005?
Assume depreciation and amortization expense of $1,096,029 in 2006 and $851,683 in 2005. What is EBITDA for 2006? For 2005?
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?
Expert Answer:
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