Suppose companies A, B, C, D, and E are all in the same narrow industry. What is a reasonable valuation for Company E if it has expected EBITDA of $100 million?
Homework Answers
Average EV of A,B,C,D = 1,950+650+2,325+4,575/4 = 9,500/4 = 2,575
Avg EBITDA of A,B,C,D = 150+30+120+49.5/4 = 87.375
EV/ EBITDA multiple of A,B,C,D = 2575/87.375 = 29.47
EV/ EBITDA multiple of E will also be avg multiple of A,B,C,D
i.e. 29.47
So, EV/ EBITDA = 29.47
EV/ 100 mn$ = 29.47
EV = 29.47 * 100
= 2947
Reasonable Enterprise Value of E is 2,947 Mn $.
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