Question

You are given the following information: Stockholders' equity as reported on the firm’s balance sheet = $5.75 billion, price/earnings ratio = 19.5, common shares outstanding = 230 million, and market/book ratio = 2.5. The firm's market value of total debt is $6 billion, the firm has cash and equivalents totaling $240 million, and the firm's EBITDA equals $3 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

1)

given equity value on balance sheet = 5.75 billion or 5750 million

market value = 5750 * (market / book ratio)

= 5750*2.5

= 14,375

share price = market value of equity / number of outstanding shares

= 14,375 / 230

= $62.50

2)

Enterprise value (EV) = market value of stock + market value of debt - cash and equivalents

= 14375 + 6000 - 240

= 20135

Given EBITDA = 3,000 millions (3 * 1000 millions)

So EV / EBITDA = 20135 / 3000

= 6.71

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