Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
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Question
Chapter 19, Problem 1P
Summary Introduction
To determine: The highest and lowest EBITDA (Earnings before interest and taxes,
Introduction:
The primary way to estimate the firm’s value can be determined by valuating the comparable. Multiples used in valuing the comparable are ratio of enterprise, value to sales, and price-earnings ratio.
Expert Solution & Answer
Answer to Problem 1P
The highest and lowest EBITDA values for I Company across the industry and firms are $13.875 and $9.075.
Explanation of Solution
Given information:
The current sales are $75 million. Refer to Table 19.2 in Problem 1 in the text.
Compute the range of EBITDA:
| Particulars | Firm O | Firm L | Firm N | Industry |
| EBITDA/Sales (A) | 0.17 | 0.185 | 0.159 | 0.121 |
| Sales(B) | $75 | $75 | $75 | $75 |
| EBITDA (A×B) | $12.75 | $13.875 | $11.925 | $9.075 |
Hence, the highest and lowest EBITDA values for I Company across the industry and firms are $13.875 and $9.075 and it ranges from $9.075 to $13.875.
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Students have asked these similar questions
Which of the following statements are true about profitability ratios? Check all that apply.
If a company has a net profit margin of 10%, it means that the company earned a net income of $0.10 for each dollar of sales.
If a company’s operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes.
An increase in the return on assets ratio implies an increase in the assets a firm owns.
If a company issues new common shares but its net income does not increase, return on common equity will increase.
How do I solve this?
The following table contains information about Wal-Mart (WMT) and Nordstrom (JWN). Compute their respective ROEs and then determine how much Wal-Mart would need to increase its profit margin in order to match Nordstrom’s ROE.
Profit Margin
Asset Turnover
Equity Multiplier
Wal-Mart
3.60%
2.4
2.6
Nordstrom
7.70%
1.7
2.4
Chapter 19 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 19.1 - Prob. 1CCCh. 19.1 - Prob. 2CCCh. 19.2 - Prob. 1CCCh. 19.2 - Prob. 2CCCh. 19.3 - What is a pro forma income statement?Ch. 19.3 - Prob. 2CCCh. 19.4 - Prob. 1CCCh. 19.4 - Prob. 2CCCh. 19.5 - Prob. 1CCCh. 19.5 - Prob. 2CC
Ch. 19.6 - Prob. 1CCCh. 19.6 - Prob. 2CCCh. 19 - Prob. 1PCh. 19 - Prob. 2PCh. 19 - Prob. 3PCh. 19 - Prob. 4PCh. 19 - Under the assumptions that Idekos market share...Ch. 19 - Prob. 6PCh. 19 - Prob. 7PCh. 19 - Prob. 8PCh. 19 - Prob. 11PCh. 19 - Calculate Idekos unlevered cost of capital when...Ch. 19 - Using the information produced in the income...Ch. 19 - How does the assumption on future improvements in...Ch. 19 - Approximately what expected future long-run growth...Ch. 19 - Prob. 16P
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