3. Using the following information, evaluate the business value for the owner: EBITDA = $430,000 Entrepreneur...

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)

Solutions

Expert Solution

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

jeff jeffy answered 1 year ago

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