Using the industry average EV/EBITDA multiple, I've valued my firm at $25,000,000. My (normalized) EBITDA last year was $1,000,000, and the industry average EBITDA multiple is 25x. My firm is a small, private entity.

Which of the following statements is true?

Question 5 options:

None of these statements are correct.

You can expect your enterprise value to be at least 20% lower than what is calculated, since the firm is private.

The figure you arrived at ($25 million) is an equity value, not enterprise value.

Proper use of the EBITDA multiple in this context is division: your firm is actually worth $40,000.

EBITDA for your firm should not be normalized; this is done only at the industry level.