The market value of the equity of Thompson, Inc., is $599,000. The balance sheet
ID: 2751037 • Letter: T
Question
The market value of the equity of Thompson, Inc., is $599,000. The balance sheet shows $38,000 in cash and $209,000 in debt, while the income statement has EBIT of $110,000 and a total of $154,000 in depreciation and amortization. What is the enterprise value-EBITDA multiple for this company?
The market value of the equity of Thompson, Inc., is $599,000. The balance sheet shows $38,000 in cash and $209,000 in debt, while the income statement has EBIT of $110,000 and a total of $154,000 in depreciation and amortization. What is the enterprise value-EBITDA multiple for this company?
Explanation / Answer
Enterprise Value = Market Capitalization ie Market Value plus value of Debt less value of cash on hand. Considering the above formulae, Enterprise value = 770000 (599000+209000-38000). EBITDA= 264000 (110000+154000). EV/EBITDA - 2.917 (770000/264000)
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