Harley-Davidson Inc. produces motorcycles, motorcycle parts and related accessories and merchandise in the United States and internationally....

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Harley-DavidsonInc. produces motorcycles, motorcycle parts and related accessoriesand merchandise in the United States and internationally. It isheadquartered in Milwaukee, Wisconsin. Use the followinginformation on Harley-Davidson and five other similar companies tovalue Harley-Davidson as of December 31, 2004.
Harley-Davidson Inc. 2004 ($ millions)
Net income $    889.77
Number of common shares, millions        294.31
Earnings before interest and tax $ 1,506.16
Tax rate 35.0%
Book value of equity $ 3,218.47
Book value interest-bearing debt $ 1,295.44
Total Sales $ 5,320.45
Total Assets $ 5,483.29
Harley- Arctic Polaris Marine Winnebago
Davidson Cat Brunswick Industries Products Industries
Comparison of Timberland with Comparable Companies:
Growth Rates, Financial Risks, Size, Returns
5-year growth rate in sales (%)               15.5            6.2            4.1            6.1          15.5           10.8
5-year growth rate in eps (%)               28.1          11.1          47.1          15.9          25.1           17.2
Interest coverage ratio (x)               60.9 *            8.9          85.1 * *
Total liabilities to assets (%)                 0.4            0.3            0.6            0.5            0.2             0.5
Total assets ($ millions)             5,483           286         4,346           793           110            395
Indicators of Value
Price/earnings (x) 16.9 17.8 27.8 28.6 18.6
MV firm/EBIT(1-tax rate) (x) 17.3 19.4 24.3 29.0 17.6
MV equity/BV equity (x) 2.8 2.8 8.0 7.7 6.5
MV firm/BV firm (x) 2.8 2.3 7.7 7.7 6.5
Price/sales (x) 0.8 0.9 1.6 2.7 1.2
MV firm/sales (x) 0.8 1.1 1.7 2.7 1.2
* These companies have little or nointerest-bearing debt outstanding.
Tasks to complete:
Step 1 - Compute Mean andMedian Values for peer-organizations. (Exclude H/D from thecomputations.
Step 2 - Present and JUSTIFYyour estimates using EACH of the following:.
       a- Price/earnings
       b- MV firm/EBIT(1 - taxrate)
       c - MV equity/BV equity
       d - MV firm/BV firm
       e - Price/sales (x)
       f - MV firm/sales (x)
Step 3 - Present your"estimated indicators of value" in a matrix format.
Step 4 - Present the impliedvalue of HOG common stock per share for each indicator of value inmatrix format.
Step 5 - Add a Text Box andpresent an evaluation of your best analysis for a "fair price" forHD Shares.

Answer & Explanation Solved by verified expert

3.8 Ratings (600 Votes)

Here are my estimates In coming to these estimates I judgedthat HarleyDavidson HOG exhibits average financial risk relativeto its peers but an aboveaverage fiveyear growth rate in salesAll of the companies have modest financial leverage and HOG isrepresentative of the See Answer

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Harley-DavidsonInc. produces motorcycles, motorcycle parts and related accessoriesand merchandise in the United States and internationally. It isheadquartered in Milwaukee, Wisconsin. Use the followinginformation on Harley-Davidson and five other similar companies tovalue Harley-Davidson as of December 31, 2004.Harley-Davidson Inc. 2004 ($ millions)Net income$ 889.77Number of common shares, millions 294.31Earnings before interest and tax$ 1,506.16Tax rate35.0%Book value of equity$ 3,218.47Book value interest-bearing debt$ 1,295.44Total Sales$ 5,320.45Total Assets$ 5,483.29Harley-ArcticPolarisMarineWinnebagoDavidsonCatBrunswickIndustriesProductsIndustriesComparison of Timberland with Comparable Companies:Growth Rates, Financial Risks, Size, Returns5-year growth rate in sales (%) 15.5 6.2 4.1 6.1 15.5 10.85-year growth rate in eps (%) 28.1 11.1 47.1 15.9 25.1 17.2Interest coverage ratio (x) 60.9* 8.9 85.1**Total liabilities to assets (%) 0.4 0.3 0.6 0.5 0.2 0.5Total assets ($ millions) 5,483 286 4,346 793 110 395Indicators of ValuePrice/earnings (x)16.917.827.828.618.6MV firm/EBIT(1-tax rate) (x)17.319.424.329.017.6MV equity/BV equity (x)2.82.88.07.76.5MV firm/BV firm (x)2.82.37.77.76.5Price/sales (x)0.80.91.62.71.2MV firm/sales (x)0.81.11.72.71.2* These companies have little or nointerest-bearing debt outstanding.Tasks to complete:Step 1 - Compute Mean andMedian Values for peer-organizations. (Exclude H/D from thecomputations.Step 2 - Present and JUSTIFYyour estimates using EACH of the following:. a- Price/earnings b- MV firm/EBIT(1 - taxrate) c - MV equity/BV equity d - MV firm/BV firm e - Price/sales (x) f - MV firm/sales (x)Step 3 - Present your"estimated indicators of value" in a matrix format.Step 4 - Present the impliedvalue of HOG common stock per share for each indicator of value inmatrix format.Step 5 - Add a Text Box andpresent an evaluation of your best analysis for a "fair price" forHD Shares.

Harley-DavidsonInc. produces motorcycles, motorcycle parts and related accessoriesand merchandise in the United States and internationally. It isheadquartered in Milwaukee, Wisconsin. Use the followinginformation on Harley-Davidson and five other similar companies tovalue Harley-Davidson as of December 31, 2004.

	Harley-Davidson Inc. 2004 ($ millions)
Net income	$ 889.77
Number of common shares, millions	294.31
Earnings before interest and tax	$ 1,506.16
Tax rate	35.0%
Book value of equity	$ 3,218.47
Book value interest-bearing debt	$ 1,295.44
Total Sales	$ 5,320.45
Total Assets	$ 5,483.29

	Harley-	Arctic		Polaris	Marine	Winnebago
	Davidson	Cat	Brunswick	Industries	Products	Industries
			Comparison of Timberland with Comparable Companies:
			Growth Rates, Financial Risks, Size, Returns
5-year growth rate in sales (%)	15.5	6.2	4.1	6.1	15.5	10.8
5-year growth rate in eps (%)	28.1	11.1	47.1	15.9	25.1	17.2
Interest coverage ratio (x)	60.9	*	8.9	85.1	*	*
Total liabilities to assets (%)	0.4	0.3	0.6	0.5	0.2	0.5
Total assets ($ millions)	5,483	286	4,346	793	110	395

			Indicators of Value
Price/earnings (x)		16.9	17.8	27.8	28.6	18.6
MV firm/EBIT(1-tax rate) (x)		17.3	19.4	24.3	29.0	17.6
MV equity/BV equity (x)		2.8	2.8	8.0	7.7	6.5
MV firm/BV firm (x)		2.8	2.3	7.7	7.7	6.5
Price/sales (x)		0.8	0.9	1.6	2.7	1.2
MV firm/sales (x)		0.8	1.1	1.7	2.7	1.2


	* These companies have little or nointerest-bearing debt outstanding.

Tasks to complete:
Step 1 - Compute Mean andMedian Values for peer-organizations. (Exclude H/D from thecomputations.
Step 2 - Present and JUSTIFYyour estimates using EACH of the following:.
a- Price/earnings
b- MV firm/EBIT(1 - taxrate)
c - MV equity/BV equity
d - MV firm/BV firm
e - Price/sales (x)
f - MV firm/sales (x)
Step 3 - Present your"estimated indicators of value" in a matrix format.
Step 4 - Present the impliedvalue of HOG common stock per share for each indicator of value inmatrix format.
Step 5 - Add a Text Box andpresent an evaluation of your best analysis for a "fair price" forHD Shares.