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The market value of the equity of Hudgins, Inc., is $645,000. The balance sheet shows $53,000 in cash and $215,000 in debt, while the income statement has EBIT of $91,000 and a total of $157,000 in depreciation and amortization. What is the enterprise value-EBITDA multiple for this company?

Respuesta :

Answer:

The enterprise value- EBITDA multiple for this company is 3.25

Explanation:

IN order to find the Enterprise value-EBITDA multiple we will have to find the enterprise value of the company and the EBITDA of the company and then divide the enterprise value by the EBITDA.

In order to find the enterprise value we will have to use the following formula

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

The Market Cap of the company is $645,000, the cash is $53,000 and the debt is $215,000, we will put these values in the formula.

EV= 645,000+215,000-53.000=807,000

Now we have to find the EBITDA of the company. EBITDA stands for earnings before interest, tax, depreciation and amortization. We already know the EBIT which is $91,000, in order to find the EBITDA we will add the depreciation and amortization to the EBIT.

91,000+157,000=248,000

Now in order to find the multiple we will divide EV by EBITDA

807,000/248,000=3.25

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