You have been asked to estimate the enterprise value of Dan Automotive as of today in an effort to determine what price the firm might sell for if it were offered for sale on the open market. You have identified a public company, Kal Motors, which has business operations that are identical to those at Dan Auto. The income statements for Dan Auto and Kal Motors for their fiscal years that ended this December 31, 2017 are as follows:

Financials ($ in Millions) Dan Auto Kal Motors

Revenue $995 $882

Cost of goods sold 652 584

Gross profit $343 $298

Selling, general, & administrative expenses 135 105

EBIT $208 $193

Interest expense 48 32

Pretax income $160 $161

Taxes 64 48

Net income $ 96 $113

Dan Auto had depreciation and amortization expenses of $42M last year and $833M of debt outstanding as of the end of the year. Kal Motors had depreciation and amortization expenses of $35M last year and $600M of net debt outstanding as of the end of the year. Its stock is currently trading at $12.25 per share with 150M in shares outstanding.

Using the EV/EBITDA multiple of Kal Motors, what is the enterprise value of Dan Auto? What is the value of 100 percent of its equity?

What are the advantages of using an EV/EBITDA multiple instead of a P/E multiple in a multiples analysis such as this?