Capital Structure Decision

Sanderson is a private company (not listed). If you wanted to compare Sandersons total equity value to a comparable publicly listed company, which ratio would you use: Price-earning ratio or EBITDA multiple? Briefly explain your choice. No calculations required.

PE ratio = Stock price / EPS = total market value of equity / Net Income = 17 to 24 times

EBITDA multiple = Total market value of equity / EBITDA = 10 to 12 times