Lassiter Motors has a debt-equity ratio of 0.45 and total debt of $186,000.The firm's market-to-book ratio is 2.6.The earnings before interest and taxes is $69,200,interest is $26,400,depreciation and amortization total $87,100,and the tax rate is 34 percent.What is the firm's EV to EBITDA ratio if the firm has $31,000 in cash?
A)7)34
B)5)47
C)6)01
D)6)38
E)7)87

Question

Quizplus · Accepted Answer

Market value of equity = ($186,000 / 0.45)× 2.6 = $1,074,666.67
EV/EBITDA = ($1,074,666.67 + $186,000 − $31,000)/ ($69,200 + $87,100)= 7.87

Lassiter Motors Has a Debt-Equity Ratio of 0