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eBook Problem Walk-Through You are given the following information: Stockholders' equity as reported on the firm’s...
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Problem Walk-Through
You are given the following information: Stockholders' equity as reported on the firm’s balance sheet = $6.75 billion, price/earnings ratio = 10.5, common shares outstanding = 140 million, and market/book ratio = 2.2. The firm's market value of total debt is $4 billion, the firm has cash and equivalents totaling $230 million, and the firm's EBITDA equals $1 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
Market to book value ratio is calculated using the below ratio:
= Market value of shares/ Book value of equity
2.2= Market value of shares/ $6.75 billion
Market value of shares= 2.2*$6.75 billion
= $14.85 billion
Price per share= $14.85 billion/ 140 million
=
$106.07
$106
EV/EBITDA ratio is calculated using the below formula:
Enterprise value/ EBITDA
Enterprise value is calculated using the below formula:
Enterprise value= Market capitalization + Total debt – Cash and cash equivalents
= $140 million*106 + $4 billion – $230 million
= $140.84 billion + $4 billion – $230 million
= $144.61 billion
EV/EBITDA= $144.61 billion/ $1 billion
= 144.61.
In case of any query, kindly comment on the solution.
jeff jeffy answered 1 year agoRelated Solutions
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