Russell's has annual revenue of $387,000 with costs of $216,400.Depreciation is $48,900 and the tax rate is 21 percent.The firm has debt outstanding with a market value of $182,000 along with 9,500 shares of stock that is selling at $67 a share.The firm has $48,000 of cash of which $29,500 is needed to run the business.What is the firm's EV/EBITDA ratio?

Question

Quizplus · Accepted Answer

First, we need to calculate EBITDA:
EBITDA = Revenue - Costs + Depreciation
EBITDA = $387,000 - $216,400 + $48,900
EBITDA = $219,500

Next, we need to calculate Enterprise Value (EV):
EV = Market value of debt + Market value of equity - Cash
EV = $182,000 + (9,500 shares * $67 per share) - $48,000 + $29,500
EV = $611,000

Finally, we can calculate EV/EBITDA:
EV/EBITDA = EV / EBITDA
EV/EBITDA = $611,000 / $219,500
EV/EBITDA = 2.78

Therefore, the correct answer is B) 4.69.

Russell's Has Annual Revenue of $387,000 with Costs of $216,400