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The biggest competitor of Coil Motors is Amp Engines. Assume that Coil Motors has earn- ings per share of USD 3.30 and an EBITDA of
The biggest competitor of Coil Motors is Amp Engines. Assume that Coil Motors has earn- ings per share of USD 3.30 and an EBITDA of USD 33 million. It also has shares outstand- ing of 5 million (before the new shares are issued). Amp Engines is highly levered, has a P/E ratio of 13.30 and an enterprive value to EBITDA multiple of 6.70. c) Estimate the share price of Coil Motors using the P/E ratio multiple. d) Estimate the share price of Coil Motors using the Enterprise value multiple. e) Which of the two multiples estimates is more appropriate and why? f) Given your choice under e), determine whether the offered share price is attractive for a potential investor. What conclusions can you make regarding the current stock price and your chosen estimate (no computation needed)? g) BONUS Question (2pt): Disucss the limiations of the DDM and Multiples approaches
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