Question
You are provided the valuation information of two comparable companies. [1]: Specific Motors has a market cap of $46 BN, outstanding debt of $13 BN,
You are provided the valuation information of two comparable companies. [1]: Specific Motors has a market cap of $46 BN, outstanding debt of $13 BN, and cash of $2 BN, while its next-year EBITDA is forecasted to be $8.85 BN and the next-year net income forecasted to be $4.55 BN. [2]: Messla Motors has a market cap of $25 BN, outstanding debt of $7 BN, and cash of $3 BN, while its next-year EBITDA is forecasted to be $4.65 BN and the next-year net income forecasted to be $2.80 BN. You want to evaluate Lockdown Motors, a private company, using the two comparable companies. Lockdown Motors is expected to have a forecasted next-year EBITDA of $3.30 BN and a forecasted next-year net income of $1.10 BN. Assume that Lockdown Motors has $5.3 BN of debt and $2.05 BN of cash on its balance sheet today. Using the average ratio of EV to next-year EBITDA of the comparable companies, what is the estimated market cap of Lockdown Motors today?
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