Duvall decides to use the GPCM to develop a value indication for Able that is independent of the FCF indication he is also pursuing. Duvall believes that many acquirors apply a multiple of market value of invested capital to EBITDA to value companies in Able’s industry. A search for comparable public companies indicated several companies that might serve as guidelines or benchmarks for valuing Able; however, all of these were much larger than Able. Duvall’s research on guideline public companies indicates the following:

• The MVIC to EBITDA multiples of such public companies averages 7.0.
• A combined downward adjustment of 15 percent for relative risk and growth characteristics of Able compared with the guideline public companies suggests an adjusted MVIC to EBITDA multiple of 5.95, rounded to 6, for Able.
• A control premium of 20 percent was reported in a single strategic acquisition from several years ago. The transaction involved an exchange of stock with no cash consideration paid.

• Duvall is not aware of any strategic buyers that might incorporate synergies into their valuation of Able.
• Normalized EBITDA is \($16\),900,000.
• Market value of debt capital is \($2\),000,000.

i. Explain the elements included in the calculation of a pricing multiple for Able.

ii. Calculate the pricing multiple appropriate for Able including a control premium adjustment.

iii. Calculate the value of Able using the guideline public company method.