Edelman Engines has $17 billion in total assets — of which cash and equivalents total $110...

Edelman Engines has $17 billion in total assets — of which cash and equivalents total $110 million. Its balance sheet shows $2.55 billion in current liabilities — of which the notes payable balance totals $1.12 billion. The firm also has $9.35 billion in long-term debt and $5.1 billion in common equity. It has 300 million shares of common stock outstanding, and its stock price is $25 per share. The firm's EBITDA totals $0.9 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.

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Expert Solution

Market value = Share price * Number of shares outstanding = $25 * 300 million = $7,500 million or $7.5 billion

Market to book ratio = Market Value / Book Value

Market to book ratio = $7.5 billion / $5.1 billion

Market to book ratio = 1.47x

Debt = Long-term debt + notes payable = $9.35 billion + $1.12 billion = $10.47 billion

Enterprise Value = Market Value + Debt - Cash = $7.5 billion + $10.47 billion - $0.11 billion = $17.86 billion

EV/EBITDA = $17.86 billion / $0.9 billion

EV/EBITDA = 19.84

jeff jeffy answered 2 years ago

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