Question
3.6-3.8 Corporation C has an EPS $3 and EBITDA of $40 million. Corporation C has 8 million shares outstanding. Another company, Corporation D, is comparable
3.6-3.8 Corporation C has an EPS $3 and EBITDA of $40 million. Corporation C has 8 million shares outstanding. Another company, Corporation D, is comparable with Corporation C in terms of its underlying business. Corporation D has a P/E ratio of 12 and an EV/EBITDA ratio of 6.
3.6 Could you estimate the value of Corporation Cs stock using the P/E ratio of Corporation D?
3.7 Could you estimate the value of Corporation Cs stock using the EV/EBITDA ratio of Corporation D?
3.8 It is said that Corporation Cs total debt is about the same as its book value of equity while Corporation D uses almost no debt. Which of your answers in (3.6) and (3.7) is more accurate?
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