Question

		DEF	LMN	XYZ		ABC
Sales		$5,000	$7,500	$2,500		$6,000
EBITDA		1,500	2,625	625		2,400
Net Income		750	1,500	250		1,500
Shares Out		750	1,000	750		1,350
Stock Price		$10	$12	$6

Using EV/EBITDA as the metric, what would be the "fair" price for total firm value of ABC using the midpoint of the comparable company analysis? Round to whole dollar.

Using P/E as the metric, what would be the "fair" price for total firm value of ABC using the midpoint of the comparable company analysis? Round to whole dollar.

Using the values you calculated previously, what would be the "fair" price for total firm value of ABC? Round to whole dollar.

Answer 1

		DEF	LMN	XYZ
	Sales	5000	7500	2500
	EBITDA	1500	2625	625
	NI	750	1500	250
	Shares outstanding	750	1000	750
	Stock price	10	12	6
1)	EV [Stock price * Shares outstanding]	7500	12000	4500
	EV/EBITDA	5.00	4.57	7.20
	Midpoint EV/EBITDA (5+4.57+7.2)/3	5.59
	Total firm value of ABC = 2400*5.59 =	13416
2)	EPS (NI/Number of shares)	1.00	1.50	0.33
	P/E (Price/EPS)	10.00	8.00	18.00
	Midpoint of P/E (10+8+18)/3	12.00
	Total firm value of ABC = (1500/1350)*12*1350 =	18000
3)	The fair value can be average of the above two values = (13416+18000)/2 =	15708