Question #120
Reading: Reading 22 Market-Based Valuation - Price and Enterprise Value Multiples
PDF File: Reading 22 Market-Based Valuation - Price and Enterprise Value Multiples.pdf
Page: 42
Status: Unattempted
Question
An analyst gathered the following data for TRK Construction [all amounts in Swiss francs (Sf)]: Recent share price Sf 22.00 Shares outstanding 40 million Market value of debt Sf 140 million Cash and marketable securities Sf 55 million Investments Sf 300 million Net income Sf 140 million Interest expense Sf 7 million Depreciation and amortization Sf 10 million Taxes Sf 56 million The EV/EBITDA ratio for TRK Construction is closest to:
Answer Choices:
A. 3.12x
B. 2.52x
C. 3.49x
Explanation
EBITDA = (net income + interest + taxes + depreciation / amortization)
EV = (market value of common stock + market value of debt – cash and investments)
EBITDA = 140 + 7 + 10 + 56 = Sf 213 million
EV = (22 × 40) + 140 – 55 – 300 = Sf 665 million
EV / EBITDA = 3.12