Question
You are valuing multiple steady-state companies in the same industry. Company A id projected to earn $160 million in EBITA next year, grow at 2
You are valuing multiple steady-state companies in the same industry. Company A id projected to earn $160 million in EBITA next year, grow at 2 percent per year, and generate ROICs equal to 15 percent. Company C is projected to earn $160 million in EBITA next year, grow at 5 percent per year, and generate ROICs equal to 12 percent. Both companies have an operating tax rate of 25 percent and a cost of capital of 10 percent. What are the enterprise-value-to-EBITA multiples for both companies? Does higher growth lead to a higher multiple in this case?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started