Question

Suppose that in the end of January 2020, you have the following financial information about T Co. :

• Sales of $518 million
• EBITDA of $55.6 million
• Cash of $100 million
• Debt of $3 million
• Number of shares 21 million
• EPS of 1.65
• Book value of equity of $12.05 million.

Assume that from a list of T Co.'s comparable firms you computed the following information:

	P / E	P / Book Equity	EV / Sales	EV / EBITDA
Average	15.01	2.84	1.06	8.49

PLEASE ANSWER QUESTIONS IN FULL

1. Using the average P/E multiple in the table, T Co. price per share would be ________ ($/per share).
2. Using the average EV / sales multiple, T Co. price per share would be ________ ($/per share).

Answer 1

1.calculatio of Price per share using average EV / sales multiple:

EV/sales=(Market Capitalisation+Debt+cash and cash equivalent)/sales

1.06=(Market Capitalisation+$3Million+$100Million)/$518 million

Market capitalisation =$549.08Million-$103Million

=446.08million

we know that ,market capitalisation=Price per share*No of shares

therefore,Price per share=$446.08million/21million

=$21.24

P/E ratio is not properly disclosed in the question,accordingly it is not possible to calculate the price per share using P/E ratio.