Question

Let’s say it’s five years later. The multiple has now risen from 8x to 10x. Assume that the EBITDA has remained the same––you’ve paid off debt such that it is now only 3x EBITDA.

Answer 1

Based on the information provided:

1. The initial multiple was 8x EBITDA.
2. After five years, the multiple has risen to 10x EBITDA.
3. The EBITDA has remained the same.
4. Debt has been paid off, and it is now only 3x EBITDA.
5. With this information, we can calculate the new enterprise value (EV) after five years.

Initial Enterprise Value (EV) = Initial Multiple x EBITDA

Initial EV = 8 x EBITDA

New Enterprise Value (EV) after five years = New Multiple x EBITDA - Debt

New EV = 10 x EBITDA - 3 x EBITDA

Simplifying the equation:

New EV = 7 x EBITDA

So, after five years, the new enterprise value will be 7 times the EBITDA.