Share
Explore BrainMass

valuation based on comparable trades of companies

See attached file.

Use Excel or Word. Use information of given in attachment to perform valuation based on comparable trades of companies. Equation: Value of equity=Value of firm-value of debt.

Attachments

Solution Preview

See the attached file.

8. First we calculate the median and mean values for Ametek's comparable companies:
Parameter Ametek Emerson Electric Franklin Electric AO Smith Woodward Governor American Power Corp. Mean Excluding Ametek Median Excluding Ametek
5 year growth rate in sales (%) 3.3 6.8 1.4 8.1 10.2 15.2 8.34 8.10
5-year growth rate in eps (%) 5.1 1.3 9.2 -5.4 19.6 3.4 5.62 3.40
Interest coverage ratio (X) 4.8 8 38 3 12.3 15.33 10.15
Total liabilities to assets (X) 0.7 0.6 0.4 0.7 0.5 0.1 0.46 0.50
Total assets ($ millions) 1029 15046 196 1294 585 1421 3708.40 1294.00

Price/earnings (X) 23.2 16.1 32 12.4 25 21.74 23.20
MV firm/EBIT(1-Tax rate) (X) 23.3 16.2 34.7 13.2 25 22.48 23.30
MV equity/BV equity (X) 3.9 3.5 1 2.1 2.3 2.56 2.30
MV firm/BV firm (X) 2.7 3.3 1 1.8 2.3 2.22 2.30
Price/sales (X) 1.5 1.4 0.4 1 2 1.26 1.40
MV firm/sales (X) 1.9 1.4 0.8 1.1 2 1.44 1.40
Now let us ...

Solution Summary

This post shows how to conduct the valuation of a company using the relative value / multiples approach. It has used six multiple: Price/earnings, MV firm/EBIT(1-Tax rate), MV equity/BV equity, MV firm/BV firm, Price/sales and MV firm/sales (X).

$2.19