Question

Valuation Using Price-to-NOA Multiple and PB Multiple

The following table provides summary data for Target Corp. and its competitors, Kohl’s Corp. and Walmart Stores Inc.

(in millions)	Target	Kohl's	Wal-Mart
Company assumed value	--	$13,255	$251,159
Equity assumed value	--	$9,254	$209,830
Net operating assets	$21,671	$9,492	$124,940
Book value of equity	$12,957	$5,491	$83,611
Net nonoperating obligations (assets)	$8,714	$4,001	$41,329
Common shares outstanding	640.2 shares	186.0 shares	3,262.0 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?
Wal-Mart?
(b) Use Kohl’s and Walmart 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.

Average of the two rounded ratios in (a) above
?? (Rounded to two decimal places.)

Use your rounded answer above to calculate the following:

Round company intrinsic value and equity intrinsic value to the nearest million. Round equity intrinsic value to the nearest cent.

Company intrinsic value $?? million
Equity intrinsic value $?? million
Equity intrinsic value per share $??

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

Round your answers to two decimal places.
Kohl's ?
Wal-Mart ?

(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
?? (Round to two decimal places.)

Use the rounded average calculated above to calculate the following:
Equity intrinsic value $?? million
Equity intrinsic value per share $??

Answer 1

a) Price to Net Operating Assets Ratio = Company Assumed Value / Net Operating Assets

Kohl's = $13255 / $9492 = 1.40 times

Wal-Mart's = $251159 / $124940 = 2.01 times

b) Average Price to Net Operating Assets = (Kohl's + Wal-mart's)/2

= (1.40 + 2.01)/2

= 1.71 times (Rounded)

Company Intrinsic Value = Target Net Operating Assets / Average Price to Net Operating Assets

= $21671 * 1.71 = $37057 million (Rounded)

Equity Intrinsic Value = Company Intrinsic Value - Net Non-operating Assets

= $37057 - $8714 = $28343 million (Rounded)

Equity Intrinsic Value Per Share = Equity Intrinsic Value / Target Common Shares

= $28343 / 640.2 = $44.27

c) PB Ratio = Equity Assumed Value / Book Value of Equity

Kohl's = $9254 / $5491 = 1.69 times (Rounded)

Wal-mart's = $209830 / $83611 = 2.51 times (Rounded)

Average PB Ratio = (1.69 + 2.51)/2 = 2.10 times

d) Equity Intrinsic Value using PB Ratio = Target Book Value of Equity * Average PB Ratio

= $12957 * 2.10 = $27210 million (Rounded)

Equity Intrinsic Value Per Share = Equity Intrinsic Value using PB Ratio / Target Common Shares

= $27210 / 640.2

= $42.50