Question

# You are given the following information: Stockholders' equity as reported on the firm’s balance sheet =...

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.

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

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