Question

delman Engines has $19 billion in total assets of which cash and equivalents total $120 million. Its balance sheet shows $2.85 billion in current liabilities of which the notes payable balance totals $0.8 billion. The firm also has $10.45 billion in long-term debt and $5.7 billion in common equity. It has 300 million shares of common stock outstanding, and its stock price is $26 per share. The firm's EBITDA totals $1.17 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

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

= (300 million shares x $ 26) / $ 5.7 billion

= ($ 7,800 million or $ 7.8 billion) / $ 5.7 billion

= $ 7.8 billion / $ 5.7 billion

= 1.37 times Approximately

EV/EBITDA is computed as follows:

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

= (300 million shares x $ 26 + $ 10.45 billion + $ 0.8 billion - $ 0.12 billion) / $ 1.17 billion

= ($ 7.8 billion + $ 10.45 billion + $ 0.8 billion - $ 0.12 billion) / $ 1.17 billion

= $ 18.93 billion / $ 1.17 billion

= 16.18 times Approximately

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