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	--	$24,098	$237,306
Equity assumed value	--	$23,470	$198,288
Net operating assets	$24,152	$6,231	$100,591
Book value of equity	$15,633	$5,603	$61,573
Net nonoperating obligations (assets)	$8,519	$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 NOA=Company Assumed Value/NOA

			Kohl's	Wal-Mart
A
	PRICE-TO-NOA		3.87	2.36
	Average Pric-to NOA	3.11

B

Company Intrinsic Value= Avg NOA multiple*Net Operating Assets of Target

Equity intrinsic value=Company intrinsic value -Net nonoperating obligations

		Target
B	Intrinsic Value	$       75,191.87
	Equity Intrinsic Value	$       66,672.87
	Equity Intrinsic Value per share	$                77.53

C

PB= Equity Assumed Value/ Book value of equity

			Kohl's	Wal-Mart
C	Price to Book Value		4.19	3.22
	Average PB	3.70

D

Equity Intrinsic Value= BV of equity*Avg PB multiple

Per Share Value= Intrinsic Value/ number of shares

D		Target
	Equity intrinsic value $Answer million	$       57,914.01
	Equity intrinsic value per share $Answer	$                67.34

Kindly refer textbook module to better understand the ratios.