Question

delman Engines has $20 billion in total assets — of which cash and equivalents total $90 million. Its balance sheet shows $4 billion in current liabilities — of which the notes payable balance totals $1.01 billion. The firm also has $9 billion in long-term debt and $7 billion in common equity. It has 500 million shares of common stock outstanding, and its stock price is $25 per share. The firm's EBITDA totals $1.625 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.

M/B:  ×

EV/EBITDA:

Answer 1

The market to book ratio is computed as shown below:

= Market value / book value

= (Number of shares outstanding x Price per share) / value of common equity

= (500 million shares x $ 25) / $ 7 billion

= ($ 12,500 million or $ 12.5 billion) / $ 7 billion

= $ 12.5 billion / $ 7 billion

= 1.79 times Approximately

EV/EBITDA is computed as follows:

= (Number of shares outstanding x Price per share + Long term debt + Notes payable - cash) / EBITDA

= (500 million shares x $ 25 + $ 9 billion + $ 1.01 billion - $ 0.09 billion) / $ 1.625 billion

= ($ 12.5 billion + $ 9 billion + $ 1.01 billion - $ 0.09 billion) / $ 1.625 billion

= $ 22.42 billion / $ 1.625 billion

= 13.80 times Approximately

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