Question

The market value of the equity of Hudgins, Inc., is $582,000. The balance sheet shows $21,000 in cash and $192,000 in debt, while the income statement has EBIT of $93,000 and a total of $137,000 in depreciation and amortization. What is the enterprise value-EBITDA multiple for this company

Answer 1

Answer:

3.27

Explanation:

Calculation to determine the enterprise value-EBITDA multiple for this company

First step is to calculate the

Enterprise value

Using this formula

Enterprise value = Market Capitalization + Total Debt - Cash and equivalents

Let plug in the formula

Enterprise value=$582000 + $192000 - $21000

Enterprise value=$753000

Second step is calculate EBITDA using this formula

EBITDA = EBIT + Depreciation and Amortization

Let plug in the formula

EBITDA= $93000 + $137000

EBITDA=$230,000

Now let determine the EBITDA multiple using this formula

EBITDA multiple = Enterprise Value / EBITDA

Let plug in the formula

EBITDA multiple=$753000 / $230000

EBITDA multiple= 3.27

Therefore enterprise value-EBITDA multiple for this company is 3.27