3. Hill Enterprises (Hill) is a privately held company that records and distributes musical recordings in a variety of formats. It is a reasonably large company for a privately held company and has several direct competitors that are publicly traded. You have been engaged to value Hill (its firm value and equity value) using market multiple valuation methods. An analyst has already prepared a summary of some accounting and market information, as well as some forecast data for your analysis (see attached Exhibit). In addition, the analyst identified three publicly traded potentially comparable companies for Hill, all of which are its direct competitors T. McGraw Corporation (McGraw), w. Nelson Company (Nelson), and T. Keith, Inc. (Keith). Further, the analyst reviewed the financial leverage of Hill and its three competitors and concluded that their capital structures were similar. Finally, the analyst found that the companies all had the same income tax rate, 40%, and that this rate applies to all forms of income.

a. Calculate each comparable companys earnings, EBIT, EBITDA, revenue, and P/E multiples using the adjusted financial statements

b. Value Hill and its equity using market multiple valuation methods.

c. Assess the pros and cons of using each comparable company.