Question

Suppose that in January 2006, Kenneth Cole Productions had sales of $518 million, EBITDA of $55.6 million, excess cash of $100 million, $3 million of debt, and 21 million shares outstanding.

Sales	518.00
EBITDA	55.60
Cash	100.00
Debt	3.00
Shares outstanding	21

a) Using the average enterprise value to EBITDA multiple in Table 1, estimate KCP’s share price.

b) What range of share prices do you estimate based on the highest and lowest enterprise value to EBITDA multiples in Table 1? (high/low prices)

c) Using the average enterprise value to sales multiple in Table 1, estimate KCP’s share price.

d) What range of share prices do you estimate based on the highest and lowest enterprise value to sales multiples in Table 1? (high/low)

Stock Prices and Multiples for the Footwear Industry, January 2006 (TABLE 1)
Ticker	Name	Stock Price ($)	Market Cap ($ millions)	Enterprise Value ($ millions)	P/E	Price/Book	Enterprise Value/Sales	Enterprise value/EBITDA
NKE	Nike	84.2	21,830	20,518	16.64	3.59	1.43	8.75
PMMAY	Puma AG	312.05	5,088	4,593	14.99	5.02	2.19	9.02
RBK	Reebok	58.72	3,514	3,451	14.91	2.41	0.9	8.58
WWW	Wolverine World Wide	22.1	1,257	1,253	17.42	2.71	1.2	9.53
BWS	Brown Shoe	43.36	800	1,019	22.62	1.91	0.47	9.09
SKX	Sketchers	17.09	683	614	17.63	2.02	0.62	6.88
SRR	Stride Rite	13.7	497	524	20.72	1.87	0.89	9.28
DECK	Deckers Outdoor	30.05	373	367	13.32	2.29	1.48	7.44
WEYS	Weco Group	19.9	230	226	11.97	1.75	1.06	6.66
RCKY	Tocky Shoes & Boots	19.96	106	232	8.66	1.12	0.92	7.55
DFZ	R.G. Barry Corp.	6.83	68	92	9.2	8.11	0.87	10.75
BOOT	LaCross Footwear	10.4	62	75	12.09	1.28	0.76	8.3

Answer 1