Question
In: Finance
EV/EBITDA multiple used in Comparable Company analysis may lead to a skewed valuation if peer firms...
EV/EBITDA multiple used in Comparable Company analysis may lead to a skewed valuation if peer firms are subject to different capital structure and tax regimes. true or false
Solutions
Expert Solution
EV/EBITDA does not considered for the taxation so it can sometimes be providing with misleading valuations and this does account for debt capital but this can provide with the inappropriate comparison when there are different capital structure so the given statement is TRUE.
The given statement is TRUE.
jeff jeffy answered 2 years agoRelated Solutions
explain the significance of Ev/Ebitda multiple in the valuation of the investment.
explain the significance of Ev/Ebitda multiple in the valuation of
the investment.
Consider the following data: Company Name Market Capitalization Enterprise Value (EV) EV/Sales EV/EBITDA EV/EBIT P/E Forward...
Consider the following data:
Company Name
Market Capitalization
Enterprise Value (EV)
EV/Sales
EV/EBITDA
EV/EBIT
P/E
Forward P/E
Total Shares
Alaska Air (ALK)
7,286
8,207
1.02x
5.1x
6.7x
7.7x
12.5x
124124
Peer Data
American Airlines (AAL)
17,879
37,327
0.87x
5.7x
8.2x
10.5x
8.2x
Delta Air Lines (DAL)
35,580
44,164
1.02x
5.7x
8.0x
10.8x
8.8x
Hawaiian (HA)
2,023
2,057
0.73x
3.4x
4.1x
5.8x
7.2x
JetBlue Airways (JBLU)
5,450
5,814
0.80x
4.1x
5.9x
4.9x
10.8x
SkyWest (SKYW)
2,909
5,040
1.56x
7.2x
12.6x
6.6x...
Estimation of a company's stock price from another company's EV/EBITDA multiple: Assume the following Comps Inc....
Estimation of a company's stock price from another company's
EV/EBITDA multiple:
Assume the following
Comps Inc. (EV/EBITDA) multiple = 7.7
Target Inc. EBITDA = $10,000,000
Target Inc. Debt = $5,000,000
Target Inc. outstanding shares = 1,000,000
Use the information above to estimate Target's implied
stock price from Comps Inc.
The methods of valuation are the following, market multiples of peer firms, book value, liquidation value,...
The methods of valuation are the following, market multiples of
peer firms, book value, liquidation value, replacement cost, market
value, and comparable transaction multiples. After looking through
valuation techniques, which one do you think is the most effective
and why? (You can research other valuation techniques outside of
the ones listed in the notes as well). (200 words)
The methods of valuation are the following, market multiples of peer firms, book value, liquidation value,...
The methods of valuation are the following, market multiples of
peer firms, book value, liquidation value, replacement cost, market
value, and comparable transaction multiples. After looking through
valuation techniques, which one do you think is the most effective
and why? (You can research other valuation techniques outside of
the ones listed in the notes as well). (200 words)
For what company would a valuation metric like EV/Sales be helpful? a. A company with high...
For what company would a valuation metric like EV/Sales be
helpful?
a.
A company with high gross margins
b.
A company with no earnings
c.
A company with low gross margins
d.
A company with no debt
You are trying to value a company using the relative valuation approach. Suppose comparable companies are...
You are trying to value a company using the relative valuation
approach. Suppose comparable companies are trading at an average
trailing EV/EBITDA multiple of 5.7. The company you are valuing
generated an EBITDA of $271 million over the last twelve months,
has $386 million of debt, $51 million in cash, and 13 million
shares outstanding. What is the company's implied share price?
Round to one decimal place.
1. Describe any four (4) suitable situations that may lead to the valuation of shares.
1. Describe any four (4) suitable situations that may lead to
the valuation of shares.
Which of the followings may lead to the wrong decision if IRR is used as the...
Which of the followings may lead to the wrong decision if IRR is
used as the investment decision criteria?
When dealing with mutually exclusive projects.
IRR never leads to the wrong decision.
When dealing with independent projects with conventional cash
flow pattern.
When dealing with small independent projects
When dealing with very large independent projects
(a) Explain how representatives may lead to biases in stock valuation. (b) Discuss three strategies active...
(a) Explain how representatives may lead to biases in stock
valuation.
(b) Discuss three strategies active managers can use to add
value to their portfolios.
(c) Define bond portfolio indexing strategy and explain its
purpose.
(d) Describe the interest rate anticipation in the active bond
portfolio management strategies.
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