Multiples Valuation and Estimation of Financial Distress of William Companies
The paper uses the market approach to calculate the William Companies multiples-based valuation of shares. The direct competitors of Williams Companies are:
Dynegy
Dominion Resources
Murphy Oil
The paper uses 2001 financial statements of Williams Companies and its competitors to carry out the multiple valuation of shares.
The next step is to determine the correct P/E (Price Earning) Ratio and the formula to calculate the P/E ratio is as follows:
P/E = "Current Stock Price / (Net Profit / Weighted average number of shares)"
The P/E ratio of Williams Companies peer companies is as follows:
Stock Price
Plus: Debt
Less: Cash
Market Capitalization
Net profit
Number of Shares
P/E
Enterprises Value
EBITDA
Dynegy
$127.50
4, 324 M
2.372B
$643.000.000
2.762 B
1,517M
Dominion Resources
$60.10
13,251 M
B
$544.000,000
31.14B
3, 030M
Murphy Oil
$84.04
83M
3.288
$331.000.000
9.9
3.774B
769M
The enterprise value reflects the market value of an organization. The enterprises value also reflects the worth of market value of a business. In other words, the enterprise value captures the costs of the business that include equity and debt. Theoretically, the enterprise value is the price that a purchaser is ready to pay for a business in case of taking over the business. The formula to calculate the enterprise value is:
Enterprise Value = "Market Capitalization + Current Portion of Long-Term Debt + Notes Payable + Long-Term Debt + Book Value of Preferred Stock + Book Value of Minority Interest - Cash and Cash Equivalents" (Y Chart, 2015).
Using the multiple valuation method, the paper estimates the valuation of Williams Companies using the P/E ratio of the peer companies. The value of the William Companies is calculated as follows:
Formula:
"Average corrected P/E ratio x net profit at the end of the forecast period."...
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