Question

# Summit Beverages Inc.’s estimated EBITDA for the TTM is $345.85 million and the median trailing enterprise... Summit Beverages Inc.’s estimated EBITDA for the TTM is$345.85 million and the median trailing enterprise value to EBITDA ratio of comparable firms is 7.50. The market value of Summit Beverages’ debt is $923.48 million and it has no outstanding preferred stock and 102.50 million shares of common stock. Estimate the value of common stock using the enterprise value to EBITDA ratio.  A.$3.37
 B. $11.45  C.$12.38
 D. $16.30  E.$25.31

Soln : EBITDA for summit's beverages TTM = $345.85 million Comparable/peer firms EV/EBITDA = 7.50, summit's beverages debt =$ 923.48 million, common stock share = 102.50 million

EV, enterprise value = Market capitalization(M) + preffered shares+ debt - cash

Cash = 0 , preffered shares = 0

Using the TTM EBITDA, we will find out EV of the summit's beverages, EV = 7.50* 345.85 = $2593.875 million M+0 + 923.48 = 2593.875, M =$ 2593.875- 923.48 = $1670.395 Value of common shares = Market Capitalization/no. of shares = 1670.395/102.50 =$16.30

Option D is the correct answer.

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