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Edelman Engines has $18 billion in total assets — of which cash and equivalents total $100...

Edelman Engines has $18 billion in total assets — of which cash and equivalents total $100 million. Its balance sheet shows $2.7 billion in current liabilities — of which the notes payable balance totals $0.82 billion. The firm also has $8.1 billion in long-term debt and $7.2 billion in common equity. It has 600 million shares of common stock outstanding, and its stock price is $22 per share. The firm's EBITDA totals $1.848 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.

M/B: ______ ×

EV/EBITDA: ___________

Expert Solution

Required 1:

Market value = Number of shares outstanding * Share price

= 600 million * $22

= $13,200 million or 13.2 billion

Market value to book value ratio = Market value / Book value

= $13.2 billion / $7.2 billion

= 1.83

Required 2:

Debt = Long-term debt + Notes payable

= $8.1 billion + $0.82 billion

= $8.92 billion

Enterprise value = Market value + Debt - Cash and cash equivalent

= $13.2 billion + $8.92 billion - $0.1 billion

= $22.22 billion

EV / EBITDA = $22.22 billion / $1.848 billion

EV / EBITDA = 12.02

jeff jeffy answered 2 years ago

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