stay, inc is considering the acquisition if positive ,inc.

information about the acquired firm

- the net income ( earnings) expected to griw at 5% per year

- current market value is 142 million

- net income 35 m

- interest expense 6 m

- depreciation 12 m

- income tax 5 m

- income from operation 46

- no amortization

- EBITDA = 35 + 6 + 5 + 12

- the expected value of positive using the discounted cash flow method = 148.86 m

recent transaction similar to this acquisition have an average market value of 126 based on average earnings of 29, the purchase price for the recent comparable transaction included a 25% premium

* question c and b

Market Net Earnings Market Market Cash EBITDA Value Income Growth Value Value (OMR (OMR (OMR (OMR of of Debt million) million) million) million) Equity (OMR (OMR million) million) Happy 117.95 22.5 4% 53.07 64.87 41.25 43.85 Smart 112.35 20.25 4.5% 59.53 52.79 45 44.88 Kind 116.26 21 4.75% 69.76 46.5 63.95 28.20 Cheerful 120 24 5% 42 78 62.4 44.32 b) (16 points) Given the information from the comparable firms, estimate Positive, Inc.'s value using the following multiples: i. Enterprise Value to EBITDA Ratio ii. Price-Earnings multiple iii. PEG ratio iv. Recent transactions (P/E) c) (12 points) Estimate the weighted average value of the firm using all five valuation methodologies you have calculated using weights or relative importance that you would give to each methodology Market Net Earnings Market Market Cash EBITDA Value Income Growth Value Value (OMR (OMR (OMR (OMR of of Debt million) million) million) million) Equity (OMR (OMR million) million) Happy 117.95 22.5 4% 53.07 64.87 41.25 43.85 Smart 112.35 20.25 4.5% 59.53 52.79 45 44.88 Kind 116.26 21 4.75% 69.76 46.5 63.95 28.20 Cheerful 120 24 5% 42 78 62.4 44.32 b) (16 points) Given the information from the comparable firms, estimate Positive, Inc.'s value using the following multiples: i. Enterprise Value to EBITDA Ratio ii. Price-Earnings multiple iii. PEG ratio iv. Recent transactions (P/E) c) (12 points) Estimate the weighted average value of the firm using all five valuation methodologies you have calculated using weights or relative importance that you would give to each methodology