Use the table for the question(s)below.
-The table above shows the stock prices and multiples for a number of firms in the newspaper publishing industry.Another newspaper publishing firm (not shown)had sales of $620 million,EBITDA of $84 million,excess cash of $66 million,$14 million of debt,and 120 million shares outstanding.If the average enterprise value to sales for comparable businesses is used,which of the following is the best estimate of the firm's share price?

Question

Use the table for the question(s)below. 
-The table above shows the stock prices and multiples for a number of firms in the newspaper publishing industry.Another newspaper publishing firm (not shown)had sales of $620 million,EBITDA of $84 million,excess cash of $66 million,$14 million of debt,and 120 million shares outstanding.If the average enterprise value to sales for comparable businesses is used,which of the following is the best estimate of the firm's share price?

Quizplus · Accepted Answer

First, we need to calculate the enterprise value (EV) of the firm:
EV = (EBITDA - Excess cash) x EV/EBITDA = (84 - 66) x 4.72 = $85.056 billion
Next, we can calculate the EV/Sales multiple for the industry as an average of the multiples given in the table:
Industry EV/Sales = (4.91 + 6.47 + 4.26 + 8.53) / 4 = 6.04
Finally, we can calculate the implied equity value and share price of the firm:
Equity value = EV - Debt = $85.056 - $14 = $85.042 billion
Implied share price = Equity value / Shares outstanding = $85.042 billion / 120 million = $7.084
Therefore, the best estimate of the firm's share price is $7.41, which is closest to $7.084.

Use the Table for the Question(s)below