Question

You are trying to value a company using the relative valuation approach. Suppose comparable companies are trading at an average trailing EV/EBITDA multiple of 4.0. The company you are valuing generated an EBITDA of $300 million over the last twelve months, has $300 million of debt, $60 million in cash, and 10 million shares outstanding. What is the company's implied share price? Round to one decimal place.

Answer #1

Formula for: Trailing EV/EBITDA multiple = Enterprise Value/Trailing EBITDA

4 = EV/$300 million

EV or Enterprise Value = $1200 million

- Enterprise Value = Market Value of equity + Market Value of Debt - Cash & Cash equivalents

$1200 millions = Market Value of equity + $300 million - $60 million

Market Value of equity= $960 million

- Intrinsic Price per share = Market Value of equity/No of shares outstanding

= $960 million/10 million

**Intrinsic Price per share = $96.0**

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