Question

25.

FFDP Corp. has yearly sales of $28.9 million and costs of $13.7 million. The company’s balance sheet shows debt of $54.9 million and cash of $38.9 million. There are 1,960,000 shares outstanding and the industry EV/EBITDA multiple is 8.4.

  

What is the company’s enterprise value? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.)

What is the stock price per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

1) We need to find the enterprise value of the company. We can calculate EBITDA as sales minus costs, so:

EBITDA = Sales − Costs

EBITDA = $28,900,000 − $13,700,000

EBITDA = $15,200,000

Solving the EV/EBITDA multiple for enterprise value, we find:

Enterprise value = $15,200,000(8.4)

Enterprise value = $127,680,000

2) The total value of equity is the enterprise value minus any outstanding debt and cash, so:

Equity value = Enterprise value − Debt + Cash

Equity value = $127,680,000 − $54,900,000 + $38,900,000

Equity value = $111,680,000

So, the price per share is:

Stock price = $111,680,000 / 1,960,000

Stock price = $56.98