Yum! Brands, Inc. (In millions except per share data) 20132012 2011 Balance Shee

Question

Yum! Brands, Inc. (In millions except per share data) 20132012 2011 Balance Sheet Cash and short-term Investments Accounts recelvable Inventory Other current assets Long-lived assets $ 573 319 294 505 7,004 776 $ 1,198 286 273 564 6,513 301 313 535 7,088 Total assets S 8,695 $9,013 $ 8,834 2,265 $ 2,279$ 2,450 Current liabilities Total liabilities 6,7016,918 1,916 $ 8,695 $ 9,013 $ 8834 6,427 39 2,229 59 Noncontrolling interest Shareholders' equity 2,253 Total debt and equity Income Statement Sales Cost of sales S 13,084 S 13,632 $ 12,626 9,140 9,501 9,852 Gross margin S 3,583 S 3,780 S 3,486 $ 1,798 $ 2,294 $ 1,815 Earnings before interest and taxes Interest Taxes 247 487 (27) 149 324 Noncontroling interest 16 $ 1,091 $ 1,597 $ 1,319 $ 74 S 65 $ 59 Net income Share price Earnings per share Number of outstanding shares (millions) 2.41 443 3.46 451 2.81 460 Cash Flows Cash flow from operations Capital expenditures Dividends S 2139 s 2,294 1.005 544 886 615

Explanation / Answer

a. Market capitalization (MC) = Current share price * No. of outstanding shares = 74 * 443 mn = $32,782 mn.

b. Enterprise value (EV) = market capitalization of equity + market value of debt + noncontrolling interest - cash and short term investments

Value of debt = Total liabilities - Current liabilities = 6,427 - 2,265 = 4,162 mn

Since market value is not given debt will be valued at face = 4,162 mn

Therefore, Enterprise value = 32,782 + 4,162 + 39 - 573 = $36,410 mn.

c. Free cash flow = cash flow from operations + dividends - capital expenditures = 2,139 + 615 - 886 = $1,868 mn.

For valuation using free cash flow multiple, we require a discount rate (generally WACC) which has not been provided.

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