Question

# Edelman Engines has \$7 billion in total assets — of which cash and equivalents total \$120...

Edelman Engines has \$7 billion in total assets — of which cash and equivalents total \$120 million. Its balance sheet shows \$1.05 billion in current liabilities — of which the notes payable balance totals \$1.02 billion. The firm also has \$3.5 billion in long-term debt and \$2.45 billion in common equity. It has 800 million shares of common stock outstanding, and its stock price is \$27 per share. The firm's EBITDA totals \$3.456 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.

Book value of assets = \$7 billion or 7000 million

cash and equivalents = \$120 million

It has 800 million shares of common stock outstanding, and its stock price is \$27 per share

=> Market value of equity = shares*price = 800*27 = \$21600 million

Book value of Debt = Market value of debt = Long-term debt + notes payable = 1020 + 3500 = \$4520 million

Book value of Common equity = \$2450 million

Market to book ratio= Market Value of equity / Book Value of equity = 21600/2450 = 8.82X

EBITDA = \$3.456 billion or \$3456 million

Enterprise Value= Market Value of equity + Market value of Debt - Cash = 21600 + 4520 - 120 = \$26000 million

=> EV/EBITDA = 26000/3456 = 7.52