Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose Rocky Brands has earnings per share of $2.25 and EBITDA of $31.5 million. The firm also has 5.5 million shares outstanding and debt of

image text in transcribed Suppose Rocky Brands has earnings per share of $2.25 and EBITDA of $31.5 million. The firm also has 5.5 million shares outstanding and debt of $115 million (net of cash). You believe Jared's Outdoor Corporation is comparable to Rocky Brands in terms of its underlying business, but Jared's has no debt. If Jared's has a P/E of 13.4 and an enterprise value to EBITDA multiple of 7.4 , estimate the value of Rocky Brands stock using both multiples. Which estimate is likely to be more accurate? Rocky Brands' stock value by using the P/E ratio is \$ per share. (Round to two decimal places.) The value of Rocky Brands by using the P/E ratio is \$ million. (Round to one decimal place.) The value of Rocky Brands by using the EBITDA ratio is $ million. (Round to one decimal place.) Rocky Brands' stock value by using the EBITDA ratio is \$ per share (Round to two decimal places.) Which estimate is likely to be more accurate? (Select from the drop-down menu.) Hint: The more accurate valuation method would take debt into consideration is the more accurate valuation method

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Interest Rate Swaps And Their Derivatives A Practitioners Guide

Authors: Amir Sadr

1st Edition

0470443944, 978-0470443941

More Books

Students also viewed these Finance questions