Bakers Industries believes that its two primary product lines, pastries and savory food, are rapidly becoming outdated. Its free cash flow is rapidly diminishing as it loses market share to new firms entering its industry. Bakers Industries has OMR 375 million in debt outstanding. Senior management expects the pastries and savory food product lines to generate OMR 48 million and OMR 29 million, respectively, in earnings before interest, taxes, depreciation, and amortization next year. Senior management also believes that they will not be able to upgrade these product lines due to declining cash flow and excessive current leverage. A competitor to its pastries business last year sold for 19 times EBITDA. Moreover, a company that is similar to its savory food product line sold last month for 22 times EBITDA. Estimate Baker's breakup value before taxes.

Bakers Industries believes that its two primary product lines, pastries and savory food, are rapidly becoming outdated. Its free cash flow is rapidly diminishing as it loses market share to new firms entering its industry. Bakers Industries has OMR 375 million in debt outstanding. Senior management expects the pastries and savory food product lines to generate OMR 48 million and OMR 29 million, respectively, in earnings before interest, taxes, depreciation, and amortization next year. Senior management also believes that they will not be able to upgrade these product lines due to declining cash flow and excessive current leverage. A competitor to its pastries business last year sold for 19 times EBITDA. Moreover, a company that is similar to its savory food product line sold last month for 22 times EBITDA. Estimate Baker's breakup value before taxes.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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