Multiples analysis: You are an analyst at a private equity firm that buys private companies, improves their operating performance, and sells them for a profit. Your boss has asked you to estimate the fair market value of the Johnson Machine Tool Company. Billy”s Tools is a public company with business operations that are virtually identical to those at Johnson. The most recent income statement for Billy”s Tools is as follows:



Cost of goods sold


Gross profit

$ 596

Selling, general, & administrative expenses


Operating profit (EBIT)

$ 385

Interest expense


Earnings before taxes

$ 373



Net income

$ 226

All dollar values are in millions. Billy”s had depreciation and amortization expenses of $71 million last year and had 200 million shares and $600 million of debt outstanding as of the end of the year. Its stock is currently trading at $12.25 per share.

Using the P/E multiple, what is the per share value of Johnson”s stock? What is the total value of Johnson Machine Tool Company?