The King Mattress Company Had the Following Operating Results for 2009-2010.In

question 76

Multiple Choice

The King Mattress Company had the following operating results for 2009-2010.In addition,the company paid dividends in both 2009 and 2010 of $60,000 per year and made capital expenditures in both years of $30,000 per year.The company's stock price in 2009 was $8 and $7 in 2010.The industry average earnings multiple for the mattress industry was 9 in 2010 and the free cash flow and sales multiples were 18 and 1.5,respectively.The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2010.
The value of the company,calculated using the free cash flow multiple for 2010 is:

• A)$1,220,000
• B)$1,620,000
• C)$2,520,000
• D)$8,400,000 18 x ($230,000 - $30,000 - $60,000)= $2,520,000

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