New York State General Adjuster 17-70 Exam With 100% Complete solutions (800 Questions & Anawers)

New York State General Adjuster 17-70 Exam With 100% Complete solutions (800 Questions & Anawers)Question 6 (12 points) You are presented with the following information for Specialty Retail: Trading Multiples December 2017 Company Description AutoZone (AZO) Engaged in retailing and distributing automotive replacement parts and accessories in Nth America. The company offers various products for cars, sport utility vehicles, vans, and light trucks, including new and remanufactured automotive hard parts, maintenance items, accessories, and non-automotive products. It offers A/C compressors, batteries and accessories, belts and hoses, carburetors, chassis, clutches, CV axles, engines, fuel pumps, fuses, ignition products, lighting products, mufflers, radiators, thermostats, starters and alternators, and water pumps. Bed Bath & Beyond (BBBY) Operates a chain of retail stores in Nth America. It sells a range of domestic merchandise, such as bed linens and related items, bath items, and kitchen textiles; and home furnishings, including kitchen and tabletop items, fine tabletop, basic housewares, general home furnishings and consumables. Best Buy (BBY) Operates as an e-commerce and physical retailer of consumer electronics in Nth America, Europe and China, offering video products, including televisions, DVD players, digital cameras and accessories, digital camcorders and accessories; audio products; mobile electronics comprising car stereo and satellite radio products; computing and mobile phone. In addition, the company offers service contracts, extended warranties, computer-related services, and product repair, as well as delivery and installation services for home theaters, and mobile audio and appliances. Home Depot (HD) Operates as a home improvement retailer. Its stores sell building materials, home improvement products, and lawn and garden products, as well as provide installation, home maintenance, and professional service programs to do-it-yourself, do-it-for-me, and professional customers. Lowe’s (LOW) Operates as a home improvement retailer. It offers products for maintenance, repair, remodeling, and home decorating, home improvement products under the categories of plumbing; appliances; tools and outdoor power equipment; lawn and garden; fashion electrical; lumber; seasonal living; paints; home fashions, storage, and cleaning; flooring; millwork; building materials; hardware; and cabinets and countertops. It also offers installation services through independent contractors in various product categories and repair services. PetSmart (PETM) Operates as a specialty retailer of products, services, and solutions for pets in the Nth America. The company offers consumables, such as pet food, treats, and litter; pet supplies and other goods comprising collars, leashes, health care supplies, grooming and beauty aids, toys, apparel, and pet beds and carriers, as well as aquariums and habitats, accessories, décor, and filters for fish, birds, reptiles, and small pets. It also provides fresh-water fish, small birds, reptiles, and small pets; and pet services, such as grooming SherwinWilliams (SHW) Engages in the development, manufacture, distribution, and sale of paints, coatings, and related products to professional, industrial, commercial, and retail customers primarily in North America, South America, Europe and Asia. The company operates through four segments: Global Finishes Group, Consumer Group, Latin America Coatings Group, and Paint Stores Group. It offers architectural paints and coatings, protective and marine products, automotive finishes, original equipment manufacturer product refinish, and related items. Staples (SPLS) Operates as an office products company. It operates in three segments: North American Stores & Online, North American Commercial, and International Operations. The company offers various office supplies and services, office machines and related products, computers and related products, and office furniture. 1-year forward forecast Ticker Market Debt NOA Enterprise Value Revenue EBITDA EBIT Capitalization AZO 7,915 2,,535 7,023 1,405 1,239 BBBY 10,,477 7, BBY 16,953 2,,525 46,313 3,088 2,503 LOW 34,814 6,,960 49,950 4,814 3,275 PETM 3,,868 5, SHW 7,029 1,099 84 8,048 7, SPLS 18,054 3,,938 23,264 2,073 1,586 In December 2017 the value of debt and debt equivalents; and non-operating assets for Home Depot were $11,434 million and $525 million, respectively. Home Depot had 1.7 billion shares outstanding at this time. While 1-year forward forecasts for Home Depot were 1-year forward forecast $million Revenue EBITDA EBIT 66,206 6,505 4,699 h Making use of the three trading multiples, determine the enterprise value, equity value of share price of Home Depot. Take the average of all comparable companies Solution. First, we calculate Enterprise/Revenues, Enterprise/EBITDA and Enterprise/EBIT multiples. EV/Revenue (AZO) = 10535/7023 = 1.5; EV/EBITDA (AZO) = 10535/1405 = 7.5; EV/EBIT = 10535/1239 = 8.5. We repeat these estimates for all companies: EV/Revenue EV/EBITDA EV/EBIT AZO 1.5 7.5 8.5 BBBY 1.3 9.5 11.3 BBY 0.4 6 7.4 LOW 0.8 8.3 12.2 PETM 0.7 6.5 10.4 SHW 1.1 9.5 11.4 SPLS 0.9 10.1 13.2 Average 0.96 8.2 10.6 Then we find equal-weighted averages for all three multiples. Using the averages of multiples of the three trading multiples for the set of comparables, we estimate the enterprise value of Home Depot. EV/Revenue EV/EBITDA EV/EBIT Metric 66,206 6,505 4,699 Multiple 0.96 8.20 10.63 Enterprise value 63,369 53,341 49,944 Non-operating assets Debt 11,434 11,434 11,434 Equity Value 52,460 42,432 39,035 Shares outstanding 1,700 1,700 1,700 Stock price 30.86 24.96 22.96 Solution suggests that the stock price of the company could be in the range between 22.96 and 30.86 Revenue, EBITDA, EBIT given Averages from the comparables EV = Rev * average NOA = 525 D