Question

You are given the following information: Stockholders' equity as reported on the firm’s balance sheet = $4 billion, price/earnings ratio = 20.5, common shares outstanding = 60 million, and market/book ratio = 1.7. The firm's market value of total debt is $8 billion; the firm has cash and equivalents totaling $320 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.

Answer 1

1. Shareholder's Equity = 4 billion
No. of shares outstanding = 60 million
Book value per share = 4000/60 = $66.66 or 67 per share
Market value / Book Value = 1.7
Market value of stock = 1.7*66.6=$113.22

2. EBITDA or earnings before interest, taxes, depreciation and amortization is a measure used to get a representation of an organization’s financial performance.

Enterprise value (EV) = Market value of equity . + Market value of debt. - Cash

=4 + 8 - 320million

=12 billion -320 million

=1.168 billion