1. Exhibit 14.12 presents market and pro?t data for three companies. Using this

Question

1. Exhibit 14.12 presents market and pro?t data for three companies.
Using this data, compute enterprise-value-to-EBITDA and enterprise-value-
to-EBITA for Companies 1 and 2. Is the net difference between Company 1
and Company 2 the same for both ratios? If not, why might this be?

PS: please provide the detail solution. thx so much

EXHIBIT 14.12 Multiples Analysis: Market and Profit Data S million Company 1 Company 2 Company 3 Market data Share price (dollars) Shares outstanding (millions) 16 30 15 25 Short-term debt Long-term debt 25 50 15 70 30 40 Operating profit EBITDA EBITA 25 30 23

Explanation / Answer

Description of the parameters Company-1 Company-2 Enterprise value=Share Price * Share outstanding + Long term debt + Short term debt (A) 200 213 EBITDA(B) 25 30 enterprise-value-to-EBITDA (A/B) 8.00 7.10 EBITA© 22 23 enterprise-value-to-EBITA(A/C) 9.09 9.26 Difference in ratio 1.09 2.16 The difference in ratio can't be same as the depriciation amounts are in different proportion of the EBITDA of the two companies.

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