5F.6
6. You are in charge of coming-up with a value for a private company that will be going public soon. The company, Wegman's, is a large regional grocery store chain. You look-up the price-to-cash flow ratio for two other regional grocery store chains and find that Albertson's is 12.2 and Safeway's is 12.1. This year's cash flow for Wegman's is $1 billion.
a. What's your best guess for what Wegman's is worth? [5]
b. What assumptions are you making in coming-up with that value? [6]