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.

Homework Answers

Answer #1

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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