Part b
After researching the competitors of EJH Enterprises, you determine that most comparable firms have the following valuation ratios: 5. EJH Enterprises has EPS of $2.00, EBITDA of $300 million, $25 million in cash, $45 million in debt, and 103 million shares outstanding. What range of prices is consistent with both sets of multiples? The range of prices will be: Lowest price within both ranges, the P/E and EV/EBITDA ranges, is $| (Round to two decimal places.) Highest price within both ranges, the P/E and the EV/EBITDA ranges, is $ (Round to two decimal places.) Data Table X (Click on the following icone in order to copy its contents into a spreadsheet.) Comp 1 12 Comp 2 11 Comp 3 12.5 Comp 4 10 EV/EBITDA Enter your answer in the edit fields and then cl P/E 19 18 20 17 ? Roybus, Inc., a manufacturer of flash memory, just reported that its main production facility in Taiwan was destroyed in a fire. Although the plant was fully insured, the loss of production will decrease Roybus's free cash flow by $178 million at the end of this year and by $59 million at the end of next year. a. If Roybus has 40 million shares outstanding and a weighted average cost of capital of 13.9%, what change in Roybus's stock price would you expect upon this announcement? (Assume that the value of Roybus's debt is not affected by the event.) b. Would you expect to be able to sell Roybus stock on hearing this announcement and make a profit? Explain. After researching the competitors of EJH Enterprises, you determine that most comparable firms have the following valuation ratios: 5. EJH Enterprises has EPS of $2.00, EBITDA of $300 million, $25 million in cash, $45 million in debt, and 103 million shares outstanding. What range of prices is consistent with both sets of multiples? The range of prices will be: Lowest price within both ranges, the P/E and EV/EBITDA ranges, is $| (Round to two decimal places.) Highest price within both ranges, the P/E and the EV/EBITDA ranges, is $ (Round to two decimal places.) Data Table X (Click on the following icone in order to copy its contents into a spreadsheet.) Comp 1 12 Comp 2 11 Comp 3 12.5 Comp 4 10 EV/EBITDA Enter your answer in the edit fields and then cl P/E 19 18 20 17 ? Roybus, Inc., a manufacturer of flash memory, just reported that its main production facility in Taiwan was destroyed in a fire. Although the plant was fully insured, the loss of production will decrease Roybus's free cash flow by $178 million at the end of this year and by $59 million at the end of next year. a. If Roybus has 40 million shares outstanding and a weighted average cost of capital of 13.9%, what change in Roybus's stock price would you expect upon this announcement? (Assume that the value of Roybus's debt is not affected by the event.) b. Would you expect to be able to sell Roybus stock on hearing this announcement and make a profit? Explain
