Question

The market value of the equity of Thompson, Inc., is $586,000. The balance sheet shows $25,000 in cash and $196,000 in debt, while the income statement has EBIT of $97,000 and a total of $141,000 in depreciation and amortization. What is the enterprise value-EBITDA multiple for this company?

Answer 1

Answer:

What is the enterprise value-EBITDA multiple for this company?

2,46

Explanation:

The ratio of EV/EBITDA is used to compare the entire value of a business with the amount of EBITDA it earns on an annual basis.  This ratio tells investors how many times EBITDA they have to pay, were they to acquire the entire business.

EV = market capitalization + preferred shares + minority interest + debt - total cash  

EV=586000-25000+196000  

 

 

EBIT = EBITDA - Depreciation  

 

EBITDA=EBIT+Depreciation  

EBITDA=97000+141000  

EBITDA=238000  

 

EV/EBITDA= 586000/238000

 

EV/EBITDA= 2,46