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Another way, relative valuation rather than inherent How is using multiples to value a firm similar...

Another way, relative valuation rather than inherent

How is using multiples to value a firm similar to valuing a house in the real estate market?

What does an Enterprise Value to EBIT value of 5.3 mean?

How do you estimate the terminal value of company B using Company C’s multiple of 5.3?

be careful using a multiple like the P/E ratio in a DCF analysis because it bases value only on the equity portion (price of equity/earnings per share) (and ignores debt). How is the enterprise value to ebit multiple different? Includes debt

Why should a financial analyst be careful using multiples? Pg 13

Solutions

Expert Solution

Enterprise value to EBITDA will mean that the overall value of the company after ascertainment of Assets and liabilities as well as equities which are present in organisation are to be accounted in order to arrive at the enterprise value and multiple has to be established according to the earnings before interest tax depreciation and amortization so we will be arriving at a value when multiple which will be according to the relative valuation principle and which can be compared with the industry peers.

It will reflect how much the company is earning in respect to the total assets it is holding and in respect to to the overall value of the company.

We will be adjusting the terminal value of the company in consideration with the other companies terminal value and we will adjust it accordingly after determination of various risk.

Enterprise value to EBITDA multiple will be different as it will be including the calculation of long term debt which has been taken by the company in order to earn the profits

Financial analysts should be careful about the multiples because multiples which are provided to each of the entities are common but some are leaders and some are leggards in the industry so there is no common in the real performance

jeff jeffy answered 1 year ago
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