If on December 31, 2005 Luther has 8 million shares outstanding trading at $15 per share, then what is Luther's enterprise value?
Use the table for the question(s) below.
Luther Corporation
Consolidated Balance Sheet
December 31, 2006 and 2005 (in $ millions)
Assets 2006 2005 Liabilities and Stockholders' Equity 2006 2005
Current Assets Current Liabilities
Cash 63.6 58.5 Accounts payable 87.6 73.5
Accounts receivable 55.5 39.6 Notes payable /
short-term debt 10.5 9.6
Inventories 45.9 42.9 Current maturities of long-term debt 39.9 36.9
Other current assets 6.0 3.0 Other current liabilities 6.0 12.0
Total current assets 171.0 144.0 Total current liabilities 144.0 132.0
Long-Term Assets Long-Term Liabilities
Land 66.6 62.1 Long-term debt 239.7 168.9
Buildings 109.5 91.5 Capital lease obligations --- ---
Equipment 119.1 99.6 Total Debt 239.7 168.9
Less accumulated
depreciation (56.1) (52.5) Deferred taxes 22.8 22.2
Net property, plant, and equipment 239.1 200.7 Other long-term liabilities --- ---
Goodwill 60.0 -- Total long-term liabilities 262.5 191.1
Other long-term assets 63.0 42.0 Total liabilities 406.5 323.1
Total long-term assets 362.1 242.7 Stockholders' Equity 126.6 63.6
Total Assets 533.1 386.7 Total liabilities and Stockholders' Equity 533.1 386.7
Answer: Enterprise value = Market value of equity + Debt - Cash
Market value of equity = 8 million × $15 = $120 million
Debt = Notes payable + Current maturities of long-term debt + Long-term debt
Debt = $9.6 + $36.9 + $168.9 = $215.4
Cash = $58.5
So, enterprise value = $120 + 215.4 - 58.5 = $276.90.
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