Question

Calculate the stock price given the following :

Trading EBITDA Multiple= 10x

Book equity= $1.0 Billion

Shares Outstanding= 110 million

Short Term Bank debt= $100 Million

Long Term Bank debt= $1.15 billion

Corporate Bons- $250 Million

Total liabilities= $1.9 Billion

Total Assets= $2.9 Billion

Cash=$ 100 Million

EBIT= $300 Million

Depreciation & Amortization = $50 Million

Whats the stock price?

Calculate the EV with stock price at $25.

Answer 1

The solution to part a):

In order to calculate the stock price, we will use the Relative Valuation Method.

Since trading EBITDA Multiple is given in the question, Enterprise Value will be calculated at trading multiple as:

EBITDA Multiple =

Now,

EBITDA = EBIT + Depreciation

= $ 300.00 + $ 50.00

= $ 350.00

Hence, using EBITDA Multiple formulae,

EV = EBITDA Multiple * EBITDA

= 10 * $350.00

EV = $ 3,500.00 million

Hence the stock price will be

	$ in Millions
Enterprise Value	3,500.00
Less: Long Term Bank Debt	1150.00
Less: Short Term Bank Debt	100.00
Less: Corporate Bonds	250.00
Add: Non-Operating Investments	0.00
Market Value of Equity Shares	2200.00

Stock Price Per Share =

= $ 2200 / 110

= $ 20.00

The solution to part b):

Calculation of Enterprise Value at stock price $ 25.00

Enterprise Value is the market value of the company from the viewpoint of the aggregate of all the financing sources.

It is calculated as:

	$ in Millions
Market Capitalisation ( i.e. Number of shares Outstanding * Market Price of share) (110 million * $ 25.00)	2750.00
Add: Long Term Debt	1150.00
Add: Short Term Debt	100.00
Add: Corporate Bonds	250.00
Less: Cash	100.00
Enterprise Value	4150.00

The Enterprise Value at a stock price of $ 25 per share is $ 4,150 million.

Note: In the calculation of Enterprise Value we have deducted the cash amount of US $ 100.00 million because it is a non-operating asset.