Business Valuation of Polo Ralph Lauren Corporation - Mark Moore ...
Business Valuation of Polo Ralph Lauren Corporation - Mark Moore ...
Business Valuation of Polo Ralph Lauren Corporation - Mark Moore ...
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on those obligations. This valuation also does not factor in the growth rate <strong>of</strong> thecorporation which has been a steady 3% per year.The Book Value <strong>of</strong> this firm is $13.67, and the market price <strong>of</strong> the firm is $38.39.Long Run Average Residual Income PerpetuityDerived Value as <strong>of</strong> April 1, 2005= $44.82Po= BVEo+ (BVEo(ROE-Ke))/(Ke-g)Po= 13.67+ 0.7600520.0244Po= 13.67 31.14967Po= 44.81967The Long Run Average RI Perpetuity model shows the estimated value <strong>of</strong> thecompany being $44.82 per share. According to the actual value <strong>of</strong> $38.41, thefirm is undervalued by $6.41. With our Ke being 5.44% and our growth <strong>of</strong> 3%,this increases the estimated value per share. With a book value <strong>of</strong> 13.67, andROE <strong>of</strong> 11%, this concludes how the valuation is estimated.Conclusion to <strong>Valuation</strong> MethodsFrom our valuations, and the information that we had available for use in derivingtheir capital structure, the Abnormal earnings growth model was the best valuation for<strong>Polo</strong> <strong>Ralph</strong> <strong>Lauren</strong> due to the continued growth <strong>of</strong> the firm and the steady growth <strong>of</strong> theearnings. We feel that with these valuations <strong>Polo</strong> <strong>Ralph</strong> <strong>Lauren</strong> is a fairly valued firm.Despite the fact that it failed to supply us with the accounting data that we needed toproperly value their capital structure.36
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