Question

Edelman Engines has $19 billion in total assets of which cash and equivalents total $90 million. Its balance sheet shows $2.85 billion in current liabilities of which the notes payable balance totals $1.02 billion. The firm also has $8.55 billion in long-term debt and $7.6 billion in common equity. It has 400 million shares of common stock outstanding, and its stock price is $25 per share. The firm's EBITDA totals $1.5 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:  x

EV/EBITDA:

Answer 1

Answer :

We know that,

Market Value = Stock price * No. of shares

= $25 * 400 million

= 10,000 million (or) 10 billion

Book value of Common equity = Common equity = $7.6 billion

Market to book ratio ( M / B ) = Market value / Book value

= $10 billion / $7.6 billion

M / B = 1.32

Debt = Long-term debt + Notes payable

= $8.55 billion + $1.02 billion

Debt = $9.57 billion

Enterprise Value = Market value + Debt - Cash

= $10 billion + $9.57 billion - $0.09 billion = $19.48 billion

EV / EBITDA = $19.48 billion / $1.5 billion

EV / EBITDA = 12.98666 (or) 12.99