Chapter 19, Problem 1P

Summary Introduction

To determine: The highest and lowest EBITDA (Earnings before interest and taxes, depreciation, and amortization) values for I Company across the industry and firms.

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.

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.