Edelman Engines has $15 billion in total assets — of which cash and equivalents total $120...

Edelman Engines has $15 billion in total assets — of which cash and equivalents total $120 million. Its balance sheet shows $3 billion in current liabilities — of which the notes payable balance totals $1.1 billion. The firm also has $7.5 billion in long-term debt and $4.5 billion in common equity. It has 300 million shares of common stock outstanding, and its stock price is $22 per share. The firm's EBITDA totals $0.792 billion. Assume the firm's debt is priced at par, so the market value of its debt equals its book value. What are Edelman's market/book and its EV/EBITDA ratios? Do not round intermediate calculations. Round your answers to two decimal places.

Expert Solution

Market to Book ratio = Market value of equity/ BV of Equity

MV of Equity = MP per share * Number of shares o/s = $ 22 * 300 m = $ 6.6 B

BV of Equity = $ 4.5 B

M/B ratio = 6.6/4.5 = 1.47 times

EV/ EBITDA = Enterprise value / EBITDA

Enterprise value = MV of Equity + MV of Debt - Cash & Equivalents

Debt = Short term debt + Long term debt = (Current liabilities - Notes payable) + Long term debt

= ( $ 3 B - $ 1.1 B) + $ 7.5 B = $ 9.4 B

EV = 6.6 + 9.4 - 0.12 = $ 15.88 B

EV/EBITDA = 15.88/ 0.792 = 20.05 times

jeff jeffy answered 2 years ago

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