Question

Score: 0 of 1 pt 6 of 11 (9 complete) P 10-16 (similar to) After researching the competitors of EJH Enterprises, you determine that most comparable firms have the following valuation ratios: Comp 1 Comp 2 Comp 3 Comp 4 EV/EBITDA 12 12.5 10 P/E 1918 2017 11 EJH Enterprises has EPS of $1.90, EBITDA of $300 million, $26 million in cash, $42 million in debt, and 103 million shares outstanding. What range of prices is consistent with both sets of multiples? The range of prices will be: Lowest price within both ranges, the P/E and EV/EBITDA ranges, is $ . (Round to two decimal places.) Highest price within both ranges, the P/E and the EV/EBITDA ranges, is $ . (Round to two decimal places.)

Answer 1

Answer)

Comp 1 EV/EBITDA P/E comp 2 Comp 3 Comp 4 12.5 1918 20 Highest Ratio Lowest Ratio Data for EJH: 1.9 EPS EBITDA Cash Debt Shares Outstanding 300 million 26 million 43 million 103 million

The Formula for EV is:

EV = Market Cap + Debt - Cash

Market Cap = EV + Cash - Debt

Hence, Below is the excel screenshot for Calculating the price first for EV/EBITDA Ratios (Formulas are stated next to the values in the bracket)

using EV/EBITDA For Highest ratio EV For Lowest ratio EV 3,750 (EV = Ratio * EBITDA of EJH) 3,000 (EV = Ratio * EBITDA of EJH) Market Cap Market Cap 3,733 Market Cap = EV + Cash - Debt 2,983 Market Cap = EV + Cash - Debt Price/share Price/share 36.24 (Market Cap/No of shares Outstanding) 28.96 (Market Cap/No of shares Outstanding)

Calculating the prices for the P/E ratios:

Using P/E For Highest ratio For Lowest ratio Price/share Price/share 38.00 (Price = Ratio * EPS) 32.30 (Price = Ratio * EPS)

Now finding the common range for both the methods:

Common Price Range in both the methods Lowest 32.30 Highest 36.24 T