Question

# Edelman Engines has \$20 billion in total assets — of which cash and equivalents total \$90...

 Edelman Engines has \$20 billion in total assets — of which cash and equivalents total \$90 million. Its balance sheet shows \$4 billion in current liabilities — of which the notes payable balance totals \$1.08 billion. The firm also has \$9 billion in long-term debt and \$7 billion in common equity. It has 500 million shares of common stock outstanding, and its stock price is \$26 per share. The firm's EBITDA totals \$1.95 billion. Assume the firm's debt is priced at par, so the market value of its debt equals its book value. What are Edelman's market/book and its EV/EBITDA ratios? Do not round intermediate calculations. Round your answers to two decimal places. M/B: _____× EV/EBITDA:

M/B=1.86
EV/EBITDA=11.79

Explanation:
Market Capitalization=(Share price)*(Number of shares outstanding)
=\$26*500=\$13000 million
=13000/1000=\$13 billion

Book value of common equity=\$7 billion

Market to book ratio (M/B)=13/7=1.857142857 or 1.86 (Rounded to two decimal places)

Now, total debt=Long term debt + Notes payable
=9+1.08=10.08

Enterprise value=Market Capitalization + Debt - Cash
=13+10.08-0.09=\$22.99 billion
Here, 0.09 billion=(90 million cash)/1000

EV/EBITDA=22.99/1.95=11.78974359 or 11.79 (Rounded to two decimal places)

#### Earn Coins

Coins can be redeemed for fabulous gifts.