Based entirely on a subjective analysis, do you think that Walgreen is overpriced because its price/sales ratio is the highest in the industry? If it is not, how would you rationalize its value?

20. Time Warner is considering a sale of its publishing division. The division had earnings before interest, taxes and depreciation of $ 550 million in the most recent year (depreciation was $ 150 million), growing at an estimated 5% a year (You can assume that depreciation grows at the same rate). The return on capital in the division is 15%, and the corporate tax rate is 40%. If the cost of capital for the division is 9%, estimate the following:

a. Value/FCFF multiple b. Value/EBIT multiple c. Value/EBITDA multiple

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