Question

# You are trying to estimate the share price for A&T Inc. You know that A&T will...

You are trying to estimate the share price for A&T Inc. You know that A&T will have EBITDA of \$50million at the end of the year. In addition, you know that A&T Inc. has \$10 million in outstanding debt, no excess cash, and 60 million outstanding shares. You have collected the following information on publicly traded comparable firms (see table below). Using the average Enterprise Value to EBITDA ratio of comparable firms, what is the best estimate of A&T's share price? Select one.

 Firm Enterprise Value (in \$ millions) EBITDA1 (in \$ millions) I \$1,800 \$167 II \$2,700 \$233 III \$960 \$88 IV \$3,400 \$297 V \$5,050 \$480
 I. \$8.50 II. \$61.11 III. \$9.04 IV. \$46.20

 Firm Enterprise Value EBITDA1 Ratio = Enterprise Value/EBITDA (in \$ millions) (in \$ millions) I \$1,800 \$167 10.77844 II \$2,700 \$233 11.58798 III \$960 \$88 10.90909 IV \$3,400 \$297 11.44781 V \$5,050 \$480 10.52083 Average 11.04883 Enterprise Value 552.4416164 Million Less: Value of debt 10 Million Value of Equity 542.4416164 Million Number of shares 60 Million Estimated Share price 9.04 Hence, the answer is III. \$9.04

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