For the Current Year company XYZ earned an EBITDA of 350M. Their Depreciation/Amoritization expense was 125M,...
For the Current Year company XYZ earned an EBITDA of 350M. Their Depreciation/Amoritization expense was 125M, interest expense was 75M, tax rate was 21%, their current market cap is 1350M.
For the following year company XYZ has been given EBITDA guidance of 550M. Their Depreciation/Amoritization expense, interest expense, and tax rate will remain the same.
1.Show your steps for calculating net income for the current year, and trailing P/E ratio.
2. Show your steps for calculating net income for the following year, and forward P/E ratio.
3. What rate of return does the forward PE ratio from question 2 correspond to?
Homework Answers
| Answer 1 | |||
| EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) | 350.00 | million | |
| Less: | Depreciation/Amortization expense | 125.00 | million |
| EBIT (Earnings Before Interest and Taxes) | 225.00 | million | |
| Less: | Interest expense | 75.00 | million |
| Earnings Before Taxes | 150.00 | million | |
| Less: | Income taxes (Earnings Before Taxes * 21%) | 31.50 | million |
| Net income for the current year | 118.50 | million | |
| Current market cap | 1,350.00 | million | |
| Divided by: | Net income for the current year | 118.50 | million |
| Trailing P/E ratio | 11.39 | times | |
| Answer 2 | |||
| EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) | 550.00 | million | |
| Less: | Depreciation/Amortization expense | 125.00 | million |
| EBIT (Earnings Before Interest and Taxes) | 425.00 | million | |
| Less: | Interest expense | 75.00 | million |
| Earnings Before Taxes | 350.00 | million | |
| Less: | Income taxes (Earnings Before Taxes * 21%) | 73.50 | million |
| Net income for the following year | 276.50 | million | |
| Current market cap | 1,350.00 | million | |
| Divided by: | Net income for the following year | 276.50 | million |
| Forward P/E ratio | 4.88 | times | |
| Answer 3 | |||
| Net income for the following year | 276.50 | million | |
| Divided by: | Current market cap | 1,350.00 | million |
| Rate of return | 20.48% | ||
| Alternative way. | |||
| One | 1 | ||
| Divided by: | Forward P/E ratio | 4.88 | |
| Rate of return | 20.48% |
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Income
Statement
Sales $191,140
Costs Except Depreciation (99,590)
EBITDA $91,550
Depreciation (6,010)
EBIT $85,540
Interest Expense (net) (570)
Pretax Income $84,970
Income Tax (29,740)
Net Income $55,230
Balance Sheet
Assets
Cash and Equivalents $15,070
Accounts Receivable 2,040
Inventories 4,070
Total Current Assets $21,180
Property, Plant and Equipment 9,980
Total Assets $31,160
Liabilities and Equity
Accounts Payable $1,510
Debt 3,940
Total Liabilities $5,450
Stockholders' Equity 25,710
Total Liabilities and Equity $31,160
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Income
Statement
Sales $191,140
Costs Except Depreciation (99,590)
EBITDA $91,550
Depreciation (6,010)
EBIT $85,540
Interest Expense (net) (570)
Pretax Income $84,970
Income Tax (29,740)
Net Income $55,230
Balance Sheet
Assets
Cash and Equivalents $15,070
Accounts Receivable 2,040
Inventories 4,070
Total Current Assets $21,180
Property, Plant and Equipment 9,980
Total Assets $31,160
Liabilities and Equity
Accounts Payable $1,510
Debt 3,940
Total Liabilities $5,450
Stockholders' Equity 25,710
Total Liabilities and Equity $31,160
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