Enterprise Value to EBIT (EV/EBIT

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A broker has estimated the equity value of Kensington Homebuilders to be £4.0 billion by applying a P/E multiple of 10 times to forecast Earnings per Share (EPS) this year. The company has a corresponding Earnings before Interest and Tax (EBIT) of £500m and £1.0 billion of net debt. Which of the following figures would correspond to the Enterprise Value to EBIT (EV/EBIT) multiple implied by the £4.0 billion equity value?
 

 
 
  • a
    6.0x
     
  • b
    None of these options are correct.
     
  • c
    8.0x
     
  • d
    10.0x
     
  • e
    12.0x
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