Please print out this document and clearly handwrite your answers to each of the questions below in the space provided. Show all your work accordingly.
A. Calculate LTM (a) Revenue and (b) Net Income for Costco Wholesale (COST) using their latest financial statements as of 3Q2011.
77946+60737-53821=84,862 MM Revenue 1303+984-871= 1,416 MM Net-income
B. Calculate Costco’s LTM (a) EBIT and (b) EBITDA.
2077+1677-1389=2,365 MM EBIT (2077+795)+(1677+582)-(1389+549)= 3192 MM EBITDA
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￼C. Calculate Costco’s (a) Market Cap, (b) Total Debt and (c) Enterprise Value as of 3Q2011.
a) 437,735,000 * 85.07 = 37.238 Bn
b) 1+900+1,247=2.148 Bn
c) 37.238+2.148+.578 (minority interest)-4.082= 35.882 Bn (35,882 MM)
D. Calculate Costco’s (a) EV/Revenue and (b) EV/EBIT multiples.
a) 35,882/84,862=.42x b) 35,882/2,365=15.17x
2. Explain the differences between a firm’s (a) market value, (b) enterprise value, and (c) book value.
a) Market value, otherwise known as market capitalization, is the current value of the firm’s common equity on the open market. This is the value necessary to buy the entire firm’s equity.
b) Enterprise value is the value of all the claims on the firm’s capital structure less cash. This includes the value of equity, preferred stock, debt, and minority interest less cash. This is the value necessary to purchase the entire firm.
c) Book value is the value of a firm’s equity based on historical accounting cost. This value is taken from the balance sheet.
3. Given the assumptions below, calculate (a) equity value and (b) enterprise value.
a) 50 MM * 20 = 1,000 MM
b) 1,000 + 25 + 250 – 50 +15 = 1,240 MM
($ in millions, except per share data; shares in millions)
Current Share Price $20.00 Fully Diluted Shares Outstanding 50.0 Total Debt 250.0 Preferred Stock 25.0 Noncontrolling Interest 15.0 Cash and Cash Equivalents 50.0
($ in millions)