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.
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Chapter 19 Solutions
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