Consider the following data for the airline Industry for April 2010 (EV = enterprise value. Book=equity book value) Discuss the potential challenges of using multiples to value an airline All the multiples show a great deal of variation, suggesting the following: Select the best choice below) OA Smaller wirlines are more efficient than their target competitors OB Ratios were probably computed at different points in time OC Airlines are very diversified nowadays. OD. Profitability and growth are widely across firms Which of these ratios is probably the most useful? (Select the best choice below) AEV/Sales OB P/E . PBook DEV/EBITDA Data table 1 PE (Click on the following icon in order to copy its contents into a spreadsheet.) Market Enterprise Company Name Capitalization Value (EV) EV/Sales Delta Air Lines (DAL) 30.057 47,000 1.1% American Airlines (AAL) 15,295 33.745 0.8x United Continental (UAL) 22,648 32.143 0.8% Southwest Airlines (LUV) 29.431 20.119 1.3x Alaska Air (ALK) 7,238 8.103 1.0x JetBlue Airways (JBLU) 5,008 5.701 0.8x SkyWest (SKYW 3.000 5,471 1.7x Hawaiian (HA) 1,300 1,575 0.8x Source: Morningstar and Yahoo Finance April 2010 EV/EBITDA 6.0x 0.3x 5.8% 0.5x 7.7% 7.3 6.7% 3.4x EV/EBIT 8.0x 10.5% 0.7x 8.9x 123 19.2% 11.3% 48x 10 2x 11.2 11. 0x 12.4% 16.6% 27.7% 11.0% 6.1% P/Book 2.OX 1.3x 23 3.0x 1.0% 1.1% 15% 1.4x