In: Finance
3. Using the following information, evaluate the business value for the owner:
EBITDA = $430,000
Entrepreneur bonus = $32,000
Sector Profit Multiple = 3
Long term business debt = $124,000
If the entrepreneur had invested $600,000 in this new, what would be the expected return (in %) on his investment by selling his firm by the estimated value calculated below? Show all steps in the table below (3points)
Step 1 - Value of the company
Value = EBIDTA * Sector profit multiple
= 430,000 * 3
= 1,290,000
Step 2: Value of owner business
Value of owner holding = Value of the company - Value of debt
= 1290,000 - 124,000
= 1,166,000
Step 3: Return calculation
Return % = ( Value of owner holdings -INvestment ) / INvestment
= ( 1166000 - 600000 ) / 600000
= 566000 / 600000
= 94.33% Answer