- The Harrison Bicycle Company had the following operating results for 2015-2016. In addition, the company paid dividends in both 2015 and 2016 of $80,000 per year and made capital expenditures in both years of $230,000 per year. The company's stock price in 2015 was $14.20 and $12.50 in 2016. Also in 2016, the industry average earnings multiple for the bicycle industry was 8 and the free cash flow and sales multiples were 16 and 1.35, respectively. The company is publicly owned and has 1,400,000 shares of outstanding stock at the end of 2016.
- Balance Sheet, Dec 31, 20162015Cash$267,000$100,000Accounts Receivable$525,000$400,000Inventory $450,000 $300,000 Total Current Assets$1,242,000$800,000Long-lived Assets1,205,000 1,100,000 Total Assets$2,447,000$1,900,000Current Liabilities$500,000$300,000Long-term Debt600,000500,000Shareholder Equity 1,347,000 1,100,000 Total Debt and Equity$2,447,000$1,900,000Income Statement, for year ended Dec 31, 20162015Sales$6,250,000$5,450,000Cost of Sales 5,125,000 4,400,000 Gross Margin1,125,0001,050,000Operating Expenses 580,000 550,000 Operating Income545,000500,000Taxes 218,000 200,000 Net Income$327,000$300,000 Cash Flow From Operations20162015Net Income$327,000$300,000Plus Depreciation Expense125,000125,000+ Decrease (-inc) in AccRec. and Inv.(275,000)-+ Increase (-dec) in Cur. Liabl. 200,000 - Cash Flow from Operations$377,000$425,000The value of the company, calculated using the free cash flow multiple for 2016 is:
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