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Homework answers / question archive / 1,A company has EBIT of $90 million, interest expense of $13 million and corporate income tax of $29 million
1,A company has EBIT of $90 million, interest expense of $13 million and corporate income tax of $29 million. What is the company's earnings per share (to two decimal places e.g. $3.95) if it has an issued capital of 66 million shares
2.
A company contemplating an IPO has earnings of $11 million and $49 million of debt. What is the fair value of equity in the company if comparable publicly-listed companies are trading at P/E multiples of 10
3.
A company has 58 million shares trading at $5.03 per share. The balance sheet shows debt of $140 million and cash of $17 million. The income statement reports depreciation and amortization of $8 million, EBIT of $49 million and net interest expense of $34 million . What is the company's EV/EBITDA ratio (to one decimal place)
1.
EPS = ((EBIT - Interest)*(1-t))/ no of shares
OR
EPS = (EBIT - Interest - taxes)/ no of shares
EPS =(90 - 13 - 29)/ 66 = 0.7273 = 0.73
Answer : 0.73
2.
Earnings= $11 million
Debt= $49 million
Total market value of the firm= $60 million
Market value of equity= $11 million
Assuming there are 1 million shares held by promoters which are to be offloaded in IPO then Earnings per share is 11
EPS= (Earnings/Number of shares)
EPS=11
A similar comparable company PE is 10
Therefore price of the company will be = 10*11
=$110
IPO price is $110
3.
EV/EBITDA Ratio = Enterprise Value / EBITDA
Enterprise value =$[(58 × 5.03) + 140 - 17]million
=$ 414.74
EBITDA = $(49 + 8 ) million =$ 57 million
EV/EBITDA Ratio = 414.74/57
= 7.2761403509
= 7.3
The Company's EV/EBITDA ratio is 7.3 times.
