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**

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