Edelman Engines has $11 billion in total assets — of which cash and equivalents total $80...

Edelman Engines has $11 billion in total assets — of which cash and equivalents total $80 million. Its balance sheet shows $1.65 billion in current liabilities — of which the notes payable balance totals $0.85 billion. The firm also has $7.7 billion in long-term debt and $1.65 billion in common equity. It has 600 million shares of common stock outstanding, and its stock price is $50 per share. The firm's EBITDA totals $4.5 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 value = Share price * Number of shares outstanding = $50 * 600 million = $30,000 million or $30 billion

Market to book ratio = Market Value / Book Value

Market to book ratio = $30 billion / $1.65 billion

Market to book ratio = 18.18x

Debt = Long-term debt + notes payable = $7.7 billion + $0.85 billion = $8.55 billion

Enterprise Value = Market Value + Debt - Cash = $30 billion + $8.55 billion - $0.080 billion = $38.47 billion

EV/EBITDA = $38.47 billion / $4.5 billion

EV/EBITDA = 8.55

jeff jeffy answered 2 years ago

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