Question

Edelman Engines has $16 billion in total assets — of which cash and equivalents total $120...

Edelman Engines has $16 billion in total assets — of which cash and equivalents total $120 million. Its balance sheet shows $3.2 billion in current liabilities — of which the notes payable balance totals $0.84 billion. The firm also has $7.2 billion in long-term debt and $5.6 billion in common equity. It has 400 million shares of common stock outstanding, and its stock price is $27 per share. The firm's EBITDA totals $1.404 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: _____

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Answer #1

Market value = Share price * Number of shares outstanding = $27 * 400 million = $10,800 million or $10.8 billion

Market to book ratio = Market Value / Book Value

Market to book ratio = $10.8 billion / $5.6 billion

Market to book ratio = 1.93x

Debt = Long-term debt + notes payable = $7.2 billion + $0.84 billion = $8.04 billion

Enterprise Value = Market Value + Debt - Cash = $10.8 billion + $8.04 billion - $0.12 billion = $18.72 billion

EV/EBITDA = $18.72 billion / $1.404 billion

EV/EBITDA = 13.33

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