Question

The market value of the equity of Hudgins, Inc., is $594,000. The balance sheet shows $33,000 in cash and $204,000 in debt, while the income statement has EBIT of $105,000 and a total of $149,000 in depreciation and amortization. What is the enterprise value-EBITDA multiple for this company

Answer 1

3.01 times

Step-by-step explanation:

Calculation for the enterprise value-EBITDA multiple for this company

First step is to calculate for the enterprise value using this formula

Enterprise value = Market capitalization + Debt−Cash

Let plug in the formula

Enterprise value = $594,000 + 204,000−33,000

Enterprise value = $765,000

Second step is find the EBITDA using this formula

EBITDA = EBIT + Depreciation and Amortization

Let plug in the formula

EBITDA = $105,000 + 149,000

EBITDA = $244,000

Third step is to calculate for the enterprise value-EBITDA multiple using this formula

Enterprise value-EBITDA multiple = Enterprise value /EBITDA

Let plug in the formula

Enterprise value-EBITDA multiple=$765,000 / $254,000

Enterprise value-EBITDA multiple = 3.01 times

Therefore the enterprise value-EBITDA multiple for this company will be 3.01 times