Question

In addition to? footwear, Kenneth Cole Productions designs and sources? handbags, apparel, and other accessories. You? decide, therefore, to consider comparables for KCP outside the footwear industry. You also know the following about? KCP: it has sales of $518 ?million, EBITDA of $55.6 ?million, excess cash of $100 ?million, $3 million of? debt, EPS of $1.65?, book value of equity of $12.05 per? share, and 21 million shares outstanding.

a. Suppose that? Fossil, Inc., has an enterprise value to EBITDA multiple of 10.93 and a? P/E multiple of 16.59. What share price would you estimate for KCP using each of these? multiples, based on the data for? KCP?

b. Suppose that Tommy Hilfiger Corporation has an enterprise value to EBITDA multiple of 8.89 and a? P/E multiple of 16.38. What share price would you estimate for KCP using each of these multiples based on the data for? KCP?

Answer 1

Data for KCP
Sales = $518 million
EBITDA = $ 55.6 million,
Excess cash = 100 million
Debt = $3 million
EPS = $1.65
Book value of equity = $12.05 per share
Shares Outstanding = 21 million .

a) Basis Fossil, Inc.,
Enterprise value to EBITDA multiple = 10.93
Enterprise Value of KCP = 10.93 * EBITDA of KCP
Enterprise Value of KCP = $ 607.708 Million
Value of Debt = 3 Million
Value of Equity of KCP = 607.708 - 3 = 604.708 Million
Value per share = 604.708 Million / Number of stock = 604.708/21
Value per share = $ 28.80

P/E multiple = 16.59
Price per share of KCP = 16.59 * EPS of KPC
Price per share of KCP = 16.59 * 1.65
Price per share of KCP = $ 27.37
Value of Equity of KCP = 27.37 * Number of Shares = 27.37 * 21
Value of Equity of KCP = $ 574.8435 Million

b) Basis Tommy Hilfiger,
Enterprise value to EBITDA multiple = 8.89
Enterprise Value of KCP = 8.89 * EBITDA of KCP
Enterprise Value of KCP = $ 494.284 Million
Value of Debt = 3 Million
Value of Equity of KCP = 494.284 - 3 = 491.284 Million
Value per share = 491.284 Million / Number of stock = 491.284/21
Value per share = $ 23.39

P/E multiple = 16.38
Price per share of KCP = 16.38 * EPS of KPC
Price per share of KCP = 16.38 * 1.65
Price per share of KCP = $ 27.03
Value of Equity of KCP = 27.03 * Number of Shares = 27.03 * 21
Value of Equity of KCP = $ 567.567 Million