In this workout, we're asked to use the assumptions and financial statement information provided to calculate the implied share price for Deere & Co as at 1st of January 2021. Now, Deere & Co is an agricultural equipment manufacturer. They produce tractors and combine harvesters. And because of the value of the goods that they sell, they provide customer financing, and they report the results of that customer financing business separately under the heading Financial Services. The machinery manufacturing part of business, they then describe as their Equipment Operations. Now, the question asked us to assume that Other Income and Other Operating Expenses are recurring and operating. And we're also gonna assume that the market value of affiliates and non-controlling interests is materially the same as their book value. Now, we've been given information on their shares outstanding. We also have the LTM depreciation and amortization for the equipment operations. We have the debt equivalent for the retirement benefit obligation. But also importantly here, we have two really significant bits of information. That's the multiples that we're gonna be using for the equipment operations business, and that's an EV multiple for that part of the business, and a PE multiple for the financial services part of the business. In terms of the disclosure that the company gave, so you can see that the equipment operations are completely carved up separately from the financial services part of the business. And likewise, for the balance sheets, that's completely separated out between Equipment Operations and Financial Services. When we scroll on down, you can see that for the equipment operations, an analyst has already extracted the key information from the financial statements. The numbers here are just lifted from face of the income statement of the equipment operations. We can see that we need to calculate LTM EBIT. And for that, we're just gonna grab the Sales and Other Income items, and then we're gonna deduct all of the operating expenses shown here.

Note that any items of interest income or expense, which were included in the income statement of the equipment operations, are excluded here because they're not part of EBIT. We need to add to that the depreciation and amortization that we're given in the question.

And that allows us to calculate the LTM EBITDA of the Equipment Operations. We can then take the multiple that we were given in the question of 19 times, multiply that by the LTM EBITDA, and that gives us an Implied EV of the Equipment Operations of 87,723. These numbers are actually in millions, and therefore, it's actually an Implied EV of $87 billion. Once we've done that, we can now go over the EV bridge in the same way that we would for any corporate business. And that will allow us to calculate the equity value of the equipment operations. There's one extra bit of information for that, which is to grab the value of the retirement benefit obligation that we were given in the question.

To go over the EV bridge, we start with our Implied EV.

We then add financial assets and non-core assets, and then we deduct financial liabilities and non-controlling interest. That gives us the Implied Equity Value of the equipment operations of just over $80 billion. Now, let's have a look at the financial services business. You can see that the analyst has already extracted the LTM Net Income that's from the face of the income statement above, and that's 566. To calculate the equity value of that part of the business, we just need to grab the multiple that we were given in the question, and multiply that by the Net Income. That gives an Implied Equity Value for the financial services business of just over $5 billion. We can then combine the equity value of the equipment operations and the financial services business to give a combined equity value of just over $85 billion. To calculate the Implied Share Price, we just take that equity value that we've calculated and divide it by the share count that we were given in the question, and that gives us an Implied Share Price for Deere & Co of $273.1.