See’s made just less than $5 million pretax in 1971. It earned a huge 60 percent profit on its $8 million in hard assets ($5 million ÷ $8 million = 60 percent). Let’s assume a discount rate of between 10 and 12 percent. (In 1972, we could get 6 percent leaving our cash in the bank. We add on a little extra—4 or 6 percent—because See’s is riskier than a bank account.) In that case, See’s was worth between five and six times its hard assets (60 percent ÷ 10 or 12 percent = 5 or 6 times). With $8 million in hard assets, See’s was worth between $40 and $48 million (5 or 6 × $8 million).
