Kirstin Zaldays, CFA, is researching the relative valuation of two companies in the aerospace/defense industry, the Lockheed Martin Corporation (LMT) and RTX Corporation (RTX). She has gathered relevant information on the companies in the following table. EBITDA comparison (in $ Millions except per-share data) Company Price per share Shares outstanding Market value of debt Cash and short-term investments Net income. Interest expense Depreciation and amortization Taxes LTM 410.96 251.8 17,545 3,673 7,060 772 1,391 1,229 RTX 72 1,452.10 38,530 5,391 5,562 1,369 4,173 937

Essentials Of Investments
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ISBN:9781260013924
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Chapter1: Investments: Background And Issues
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Kirstin Zaldays, CFA, is researching the relative valuation of two companies in the aerospace/defense
industry, the Lockheed Martin Corporation (LMT) and RTX Corporation (RTX). She has gathered relevant
information on the companies in the following table.
EBITDA comparison (in $ Millions except per-share data)
Company
Price per share
Shares outstanding
Market value of debt
Cash and short-term investments
Net income
Interest expense
Depreciation and amortization
Taxes
LTM
410.96
251.8
17,545
3,673
7,060
772
1,391
1,229
RTX
72
1,452.10
38,530
5,391
5,562
1,369
4,173
937
Transcribed Image Text:Kirstin Zaldays, CFA, is researching the relative valuation of two companies in the aerospace/defense industry, the Lockheed Martin Corporation (LMT) and RTX Corporation (RTX). She has gathered relevant information on the companies in the following table. EBITDA comparison (in $ Millions except per-share data) Company Price per share Shares outstanding Market value of debt Cash and short-term investments Net income Interest expense Depreciation and amortization Taxes LTM 410.96 251.8 17,545 3,673 7,060 772 1,391 1,229 RTX 72 1,452.10 38,530 5,391 5,562 1,369 4,173 937
Using the information in the table, calculate EV/EBITDA for LTM and RTX. Which company should Kirstin
recommend as relatively undervalued?
a) 11.23 and 11.44; LTM is slightly undervalued relative to RTX
b) 11.23 and 10.26; RTX is undervalued relative to LTM
c) 10.35 and 11.44; LTM is undervalued relative to RTX
13.2 and 12.45; RTX is undervalued relative to LTM
Transcribed Image Text:Using the information in the table, calculate EV/EBITDA for LTM and RTX. Which company should Kirstin recommend as relatively undervalued? a) 11.23 and 11.44; LTM is slightly undervalued relative to RTX b) 11.23 and 10.26; RTX is undervalued relative to LTM c) 10.35 and 11.44; LTM is undervalued relative to RTX 13.2 and 12.45; RTX is undervalued relative to LTM
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