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Case study 5: Estimating Adidas's equity value Germany-based Adidas is one of the world's largest producers of sportswear. During 2011, Adidas showed...

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Case study 5: Estimating Adidas’s equity value Germany-based Adidas is one of the world’s largest producers of sportswear. During 2011, Adidas showed strong operational performance and saw its equity value increase by 3 percent to close to 10.5 billion. On April 1, 2012, one month before the publication of the first-quarter results, an analyst produces the following forecasts of Adidas’s 2012–2014 performance and financial position: Assume that Adidas’s cost of equity equals 10 percent. Answer the following questions. 1. Calculate abnormal earnings for the years 2012–2014. 2. Assume that abnormal earnings in 2015 and beyond are zero. Estimate the value of Adidas’s group equity (group equity is the sum of shareholders’ equity and minority interests). What
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might explain the difference between your equity value estimate and Adidas’s actual market value (of 12,247 million)? Notes for this case study Please do not submit Excel workouts only. Word documents with excel results pasted inside are welcomed. Showing the procedure by which you achieve each item will help to maximise your mark.
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Income statement 2012E 2013E 2014E Sales 14917.0 15915.8 17029.7 Gross proft 7042.3 7532.9 8046.5 EBIT 1192.4 1380.6 1609.9 Net interest expense -74.7 -55.0 -39.6 Proft beFore tax 1117.7 1325.6 1570.3 Tax expense -313.0 -371.2 -439.7 Group proft 804.7 954.4 1130.6 Minority interest -1.5 -1.7 -1.8 Net proft 803.2 952.7 1128.8 Balance sheet 2011R 2012E 2013E 2014E Fixed assets 4717.0 5273.0 5626.1 6019.9 Current opera±ng assets 4649.0 5197.0 5545.0 5933.1 Investment assets 2014.0 2251.4 2402.2 2570.3 Total assets 11380.0 12721.5 13573.3 14523.2 Shareholders' equity 5327.0 5878.5 6520.0 7272.2 Minority interest 4.0 5.0 6.1 7.0 Debt 1589.0 1852.2 1727.6 1552.2 Current opera±ng liabili±es 3992.0 4462.6 4761.4 5094.5 Non-current opera±ng liabili±es 468.0 523.2 558.2 597.3 Total equity and liabili±es 11380.0 12721.5 13573.3 14523.2 Other es±mates 2011R 2012E 2013E 2014E Dividends 251.7 311.3 376.6
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Adidas Company.docx

ADIDAS COMPANY Adidas Company’s Equity Determination
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Date 1 ADIDAS COMPANY 2 Adidas Company
Question one
Abnormal Earnings (AE) is given by the actual...

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