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gladu [14]
2 years ago
8

Edelman Engines has $16 billion in total assets — of which cash and equivalents total $120 million. Its balance sheet shows $3.2

billion in current liabilities — of which the notes payable balance totals $0.84 billion. The firm also has $7.2 billion in long-term debt and $5.6 billion in common equity. It has 400 million shares of common stock outstanding, and its stock price is $27 per share. The firm's EBITDA totals $1.404 billion. Assume the firm's debt is priced at par, so the market value of its debt equals its book value. What are Edelman's market/book and its EV/EBITDA ratios? Do not round intermediate calculations. Round your answers to two decimal places.
Business
1 answer:
liraira [26]2 years ago
7 0

Answer:

market/book ratio = 1.93

EV/EBITDA ratio = 15.01

Explanation:

market/book ratio = market price per share / book price per share

  • market price per share = $27
  • book value per share = $5,600,000,000 / 400,000,000 = $14

market/book ratio = $27 / $14 = 1.93

EV/EBITDA ratio = EV (enterprise value) / EBITDA

  • enterprise value = market value of equity + total liabilities - cash & cash equivalents = $10,800,000,000 + $10,400,000,000 - $120,000,000 = $21,080,000,000
  • EBITDA = $1,404,000,000

EV/EBITDA ratio = $21,080,000,000 / $1,404,000,000 = 15.01

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