After researching the competitors of EJH Enterprises, you determine that most co
ID: 2784935 • Letter: A
Question
After researching the competitors of EJH Enterprises, you determine that most comparable firms have the following valuation ratios: Comp 4 10 17 Comp 2 Comp 1 12 12.5 EVIEBITDA P/E19 18 20 EJH Enterprises has EPS of $2.00, EBITDA of $290 million, $28 million in cash, $40 million in debt, and 105 million shares outstanding. What range of prices is consistent with both sets of multiples? The range of prices will be Highest price within both the P/E and EVIEBITDA ranges is s (Round to two decimal places.) Lowest price within both the P/E and EVIEBITDA ranges is . (Round to two decimal places.)Explanation / Answer
Equity value = (EV/ EBITDA * 290) + 28 - 40
Equity value comp 1 = 3,468
Equity value comp 2 = 3,178
Equity value comp 3 = 3,613
Equity value comp 4 = 2,888
P0 for comp 1 = 3,468/ 210 = 16.51
P0 for comp 2 = 3,178/ 210 = 15.13
P0 for comp 3 = 3,613/ 210 = 17.20
P0 for comp 4 = 2,888/ 210 = 13.75
Lowest price within both the P/E and EV/EBITDA ranges is ($13.75)
Highest price within both P/E and EV/EBITDA ranges is ($17.20)
Comp 1 Comp 2 Comp 3 Comp 4 EV/EBITDA 12 11 12.5 10 P/E 19 18 20 17