Time Warner is considering a sale of its publishing division. The division had earnings EBITDA of $550 million in the most recent year (depreciation was $150 million), growing at an estimated 5% a year (you can assume that depreciation grows at the same rate). The return on capital in the division is 15%, and the corporate tax rate is 40%. If the cost of capital for the division is 9%, estimate the following: a. EV/FCFF multiple. b. EV/EBIT multiple. c. EV/EBITDA multiple.
Time Warner is considering a sale of its publishing division. The division had earnings EBITDA of $550 million in the most recent year (depreciation was $150 million), growing at an estimated 5% a year (you can assume that depreciation grows at the same rate). The return on capital in the division is 15%, and the corporate tax rate is 40%. If the cost of capital for the division is 9%, estimate the following: a. EV/FCFF multiple. b. EV/EBIT multiple. c. EV/EBITDA multiple.
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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Q1: Time Warner is considering a sale of its publishing division.
The division had earnings EBITDA of $550 million
in the most recent year (
growing at an estimated 5% a year (you can assume that
depreciation grows at the same rate). The return on capital
in the division is 15%, and the corporate tax rate is
40%. If the cost of capital for the division is 9%, estimate
the following:
a. EV/FCFF multiple.
b. EV/EBIT multiple.
c. EV/EBITDA multiple.
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