Question

The fair value of the equity of Thompson, Inc., is $610,000. The balance sheet shows$39,000 in cash and $204,000 in debt, while the income statement has EBIT of$96,000 and a total of $143,000 in depreciation and amortization. What is the enterprise value–EBITDA multiple for this company?

Answer 1

The enterprise value-EBITDA multiple for Thompson, Inc. is calculated by dividing the enterprise value by the EBITDA. The enterprise value is $775,000, and the EBITDA is $239,000, resulting in a multiple of approximately 3.24.

Step-by-step explanation:

To calculate the enterprise value–EBITDA multiple for Thompson, Inc., we first need to find the enterprise value (EV) and the earnings before interest, taxes, depreciation, and amortization (EBITDA). The enterprise value is calculated by adding the company's debt to its equity value and subtracting any cash or cash equivalents. The EBITDA is obtained by adding back depreciation and amortization expenses to the earnings before interest and tax (EBIT).

In this case, the EV of Thompson, Inc. is $610,000 (equity) + $204,000 (debt) - $39,000 (cash) = $775,000. The EBITDA is $96,000 (EBIT) + $143,000 (depreciation and amortization) = $239,000. Therefore, the enterprise value–EBITDA multiple is $775,000 / $239,000 = approximately 3.24.