Question

# Edelman Engines has \$20 billion in total assets — of which cash and equivalents total \$100...

Edelman Engines has \$20 billion in total assets — of which cash and equivalents total \$100 million. Its balance sheet shows \$3 billion in current liabilities — of which the notes payable balance totals \$0.88 billion. The firm also has \$11 billion in long-term debt and \$6 billion in common equity. It has 400 million shares of common stock outstanding, and its stock price is \$22 per share. The firm's EBITDA totals \$1.408 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.

Market value = Share price * Number of shares outstanding = \$22 * 400 million = \$8,800 million or \$8.8 billion

Market to book ratio = Market Value / Book Value

Market to book ratio = \$8.8 billion / \$6 billion

Market to book ratio = 1.47x

Debt = Long-term debt + notes payable = \$11 billion + \$0.88 billion = \$11.88 billion

Enterprise Value = Market Value + Debt - Cash = \$8.8 billion + \$11.88 billion - \$0.10 billion = \$20.58 billion

EV/EBITDA = \$20.58 billion / \$1.408 billion

EV/EBITDA = 14.62

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