Estimate the fair market value of mms equity

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Reference no: EM13213062

Consider the financial statements below for Media Motors. The firm's cost of capital is 10%. The firm is stable, and the long-term growth rate for all items is expected to be 4%. Their CEO's name is Ray Charles. Use the information below to estimate the fair market value of MM's equity as of year-end 2013.

2013 Income Statement

Sales

500

Cost of goods sold

250

SG&A expense

50

EBIT

200

Interest expense

40

Taxable income

160

Taxes

64

Net Income

96

 

2012 Balance Sheet

 

Cash

50

 

Accounts payable

70

Accounts receivable

100

 

Total current liab.

70

Inventory

200

 

 

 

Total current assets

350

 

Long-term debt

400

 

 

 

 

 

Gross fixed assets

1,000

 

Common stock

200

Accumulated depreciation

200

 

Retained earnings

480

Net fixed assets

800

 

Total equity

680

Total

1,150

 

Total

1,150







2013 Balance Sheet

 

Cash

70

 

Accounts payable

100

Accounts receivable

130

 

Total current liab.

100

Inventory

220

 

 

 

Total current assets

420

 

Long-term debt

450

 

 

 

 

 

Gross fixed assets

1,120

 

Common stock

250

Accumulated depreciation

270

 

Retained earnings

470

Net fixed assets

850

 

Total equity

720

Total

1,270

 

Total

1,270







Reference no: EM13213062

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