Question

Suppose that Fossil, Inc., has an enterprise value to EBITDA multiple of 9.73 and a P/E multiple of 18.4. What share price would you estimate for KCP using each of these multiples

Answer 1

Answer and Explanation:

The computation is shown below:

Based on EV or EBIDTA

The share price is

= Value of equity ÷ number of shares

where,

Value of equity is

= Enterprise value + cash - debt

= 55.6 × 9.73 + 100 - 3

= 540.988

And, the number of shares is 21

So,

the price of the share is

= 637.988 ÷ 21

= 30.38

Based on the P/E ratio is

= 18.40 × 1.65

= 30.36