Question

You are given the following information: Stockholders' equity as reported on the firm’s balance sheet = $4.5 billion, price/earnings ratio = 17.5, common shares outstanding = 220 million, and market/book ratio = 1.3. The firm's market value of total debt is $7 billion, the firm has cash and equivalents totaling $290 million, and the firm's EBITDA equals $2 billion. What is the price of a share of the company's common stock? Do not round intermediate calculations. Round your answer to the nearest cent.

What is the firm's EV/EBITDA? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1

a). Book Value per share = Stockholders' Equity / Shares Outstanding

= $4.5 billion / 220 million = $20.45

Market/Book Price = 1.3

Market Price / $20.45 = 1.3

Market Price = 1.3 * $20.45 = $26.59

b). Market Value of Equity = Market Price * Shares Outstanding

= $26.59 * 220 million = $5.85 billion

Enterprise value (EV) = Market value of equity + Market value of debt - Cash

= $5.85 billion + $7 billion - $290 million = $12.56 billion

EV/EBITDA = $12.56 billion / $2 billion = 6.28 times