The following table provides summary data for Applied Materials Inc. and its com
ID: 2581598 • Letter: T
Question
The following table provides summary data for Applied Materials Inc. and its competitors, KLA Tencor Corporation and Lam Research Corporation.
(in millions)
a. Compute the price to net income ratio for both KLA Tencor Corporation and Lam Research Corporation.
Round answers to two decimal places, when applicable.
b. Use KLA Tencor Corporation and Lam Research Corporation as comparables, along with the price to net income ratios from part a, and then estimate for Applied Materials Inc. its equity intrinsic value and its equity intrinsic value per share.
Round equity intrinsic value to the nearest million.
Round equity intrinsic value per share to two decimal places.
(in millions)
Applied Materials KLA Tencor Lam Research Company assumed value - $9,568 $11,307 Equity assumed value - $8,765 $13,022 NOPAT $1,444 $440 $674 Net income $1,377 $298 $588 Net nonoperating obligations (assets) $(1,369) $803 $(1,715) Common shares outstanding 1,160.0 157.9 158.5Explanation / Answer
a) Price to Net income ratio KLA Tencor = 9568/298 = 32.11 Lam Research = 11307/588 = 19.23 b) Average Price to net income ratio = (32.11+19.23)/2 = 25.67 Company assumed value of Applied materials = 1377*25.67 = $ 35,347.59 million Add: NNA $ 1,369.00 million Equity value $ 36,716.59 million Value per share (36716.59/1160) $ 31.65
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