Ingenious Corporation is evaluating an opportunity to make an investment in Binary Bits, Inc. The EBITDA for Binary Bits is currently $19 million, and similar deals have recently closed at a 6.0 multiple. The corporate tax rate is 21%. What is the estimated valuation for Binary Bits, Inc.?
A)$114,000
B)$900,600
C)$1,140,000
D)$114,000,000
E)$542,857,143

Question

Quizplus · Accepted Answer

The estimated valuation for Binary Bits, Inc. can be calculated by applying the 6.0 multiple to the EBITDA of $19 million. This results in a valuation of $19 million * 6 = $114 million, or $114,000,000. The corporate tax rate is not relevant for calculating this valuation based on EBITDA multiples.

Ingenious Corporation Is Evaluating an Opportunity to Make an Investment