Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

blur-text-image

Get Instant Access with AI-Powered Solutions

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

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

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

Get Started

Students also viewed these Finance questions