You are given the following information: Stockholders' equity as reported on the firm’s balance sheet = $6.75 billion, price/earnings ratio = 18.5, common shares outstanding = 220 million, and market/book ratio = 2

You are given the following information: Stockholders' equity as reported on the firm’s balance sheet = $6.75 billion, price/earnings ratio = 18.5, common shares outstanding = 220 million, and market/book ratio = 2. The firm's market value of total debt is $4 billion, the firm has cash and equivalents totaling $210 million, and the firm's EBITDA equals $3 billion. What is the price of a share of the company's common stock? Do not round intermediate calculations. Round your answer to the nearest cent.

What is the firm's EV/EBITDA? Do not round intermediate calculations. Round your answer to two decimal places.

Solutions

Expert Solution

a). Book Value of equity = $6.75 billion

Market-to-Book Ratio = 2

Market-to-Book Ratio = Market Value of equity/Book Value of equity

2 = Market Value of equity/$6.75 billion

Market Value of equity = $13.5 billion

Price per share of Stock = Market Value of equity/No of shares outstanding

Price per share of Stock = $13.5 billion/0.22 billion

Price per share of Stock = $61.36 per share

b). Enterprise Value = Market Value of equity + Market Value of Debt - cash 7 Cash equivalents

Enterprise Value = $13.5 billion + $4 billion - $0.21 billion

Enterprise Value = $17.29 billion

- Firm's EV/EBITDA = Enterprise Value(EV)/EBITDA

= $17.29 billion/$3 billion

Firm's EV/EBITDA = 5.76 times

jeff jeffy answered 2 years ago

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