Corporate Finance Plus MyLab Finance with Pearson eText -- Access Card Package (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
4th Edition
ISBN: 9780134408897
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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Chapter 19 Solutions
Corporate Finance Plus MyLab Finance with Pearson eText -- Access Card Package (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
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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