Question

Valuation Using Price-to-NOA Multiple and PB Multiple

The following table provides summary data for Target and its competitors, Kohl's and Wal-Mart.

(in millions)	Target	Kohl's	Wal-Mart
Company assumed value	--	$21,598	$242,306
Equity assumed value	--	$20,970	$203,288
Net operating assets	$25,152	$6,231	$100,591
Book value of equity	$15,633	$5,603	$61,573
Net nonoperating obligations (assets)	$9,519	$628	$39,018
Common shares outstanding	860 shares	321 shares	41 shares

(a) Compute the price to net operating assets ratio for both Kohl's and Wal-Mart.

Round your answers to two decimal places.

Kohl's Answer

Wal-Mart Answer

(b) Use Kohl's and Wal-Mart as comparables, along with the price to NOA ratios from part (a), and then estimate for Target its company intrinsic value, its equity intrinsic value, and its equity intrinsic value per share.

Round the intrinsic value and equity intrinsic value to the nearest million and the value per share to the nearest cent.

Average of the two rounded ratios in (a) above
Answer

(Round to two decimal places.)

Use your rounded answer above to calculate the following:
Company intrinsic value $Answer

million
Equity intrinsic value $Answer million
Equity intrinsic value per share $Answer

(c) Compute the PB ratio for both Kohl's and Wal-Mart.

Round your answers to two decimal places.
Kohl's Answer

Wal-Mart Answer

(d) Use Kohl's and Wal-Mart as comparables, along with the PB ratios from part (c), and then estimate for Target its equity intrinsic value and its equity intrinsic value per share.

Round the equity intrinsic value to the nearest million and the value per share to the nearest cent.

Average of the two rounded ratios in (c) above
Answer

(Round to two decimal places.)

Use the rounded average calculated above to calculate the following:
Equity intrinsic value $Answer

million
Equity intrinsic value per share $Answer

Answer 1

a) Price to Net Operating Assets Ratio
Description	Kohl's	Wal-mart
Company assumed Value (A)	$       21,598	$       242,306
Net Operating Assets (B)	$         6,231	$       100,591
Price to Net Operating Assets Ratio (A / B)	3.47	2.41
Average of NOA (3.47+2.41)/2	2.94
b) Company's Instrinsic Value
Description	Target
Net Operating Assets (A)	$ 25,152.00
Average of NOA (B)	2.94
Company's Instrinsic Value (A X B)	$ 73,884.52
Equity Instrinsic Value
Description	Target
Book Value of Equity (A)	$ 15,633.00
Average of NOA (B)	2.94
Company's Instrinsic Value (A X B)	$ 45,922.26
Equity Intrinsic Value per share
Description	Target
Equity Instrinsic Value (A)	$ 45,922.26
Target Common Shares Outstanding (B)	860.00
Company's Instrinsic Value (A / B)	$         53.40
c) PB Ratio
Description	Kohl's	Wal-mart
Equity Assumed Value	$       20,970	$       203,288
Book Value of Equity (B)	$         5,603	$         61,573
PB Ratio (A / B)	3.74	3.30
Average of PB Ratio (3.47+2.41)/2	3.52
d) Equity Instrinsic Value with PB Ratio
Description	Target
Target Book Value of Equity (A)	$ 15,633.00
Average of PB Ratio (B)	3.52
Company's Instrinsic Value (A X B)	$ 55,061.11
Equity Intrinsic Value per share with PB Ratio
Description	Target
Equity Instrinsic Value with PB Ratio (A)	$ 55,061.11
Target Common Shares Outstanding (B)	860.00
Company's Instrinsic Value (A / B)	$         64.02