Creating valuation multiples for the comparable companies (Exhibit 7b)
Price to earnings (EBITDA)
Price to sales
Applying those valuation multiples to Kohler to obtain two valuations for Kohler (one based on price/ sales and one based on price / earnings) from each comparable company.
Select a value for Kohler overall from the median of these results.
Divide by the number of shares for Kohler to determine the price per share based on a market value.
Develop a discounted cash flow analysis of the value of Kohler stock by:
Calculate the annual historic and projected net cash from operations and investment.
For this exercise, use an 8% discount rate.
Calculate a terminal value by:
Computing a compound annual growth rate for:
Kohler actual net cash flow
Kohler projected net cash flow
Kohler total (actual & projected) net cash flow
Applying your choice of CAGR to the final year’s net cash flow.
Discounting that stream into perpetuity at the discount rate from above.
Write a brief opinion on the value of a privately-held share of Kohler giving:
The date of the valuation.
Your choice of a value.
The basis for your selection. (Your reasons for concluding what you did.)
Exhibit 3a – Kohler Co. Historical Balance Sheets
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