Use the table for the question(s)below.
-The table above shows the share prices and multiples for a number of firms in the media industry. Another media 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 range of reasonable share price estimates?
A)$1.12 to $1.68
B)$6.00 to $9.04
C)$6.07 to $8.59
D)$5.72 to $8.09

Question

Use the table for the question(s)below. 
-The table above shows the share prices and multiples for a number of firms in the media industry. Another media 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 range of reasonable share price estimates?
A)$1.12 to $1.68 
B)$6.00 to $9.04 
C)$6.07 to $8.59 
D)$5.72 to $8.09

Quizplus · Accepted Answer

To estimate the share price range using the enterprise value to sales (EV/Sales) multiple, we first calculate the enterprise value (EV) of the firm. The EV is calculated as Market Capitalization + Debt - Excess Cash. However, since we're using the EV/Sales multiple, we focus on the sales figure and the average EV/Sales multiple.Given:- Sales = $620 million- Average EV/Sales multiple = not directly provided, but we're instructed to use the average for the industry.The share price estimate would be derived from the EV calculated using the average EV/Sales multiple applied to the firm's sales, adjusted for debt and excess cash, and then divided by the number of shares outstanding.Without the specific average EV/Sales multiple, we can't calculate the exact EV or share price. However, the correct answer must be chosen based on the information that would typically involve calculating the EV from the sales and the given multiples, then adjusting for net debt (debt - excess cash) and dividing by the number of shares to find the share price.Option C is selected based on the assumption that it correctly reflects the outcome of such a calculation, considering the typical process for estimating share price using EV/Sales multiples in the absence of specific multiples or a detailed calculation example in the question. This approach aligns with standard financial analysis techniques for valuing companies based on industry averages and comparable company analysis.

Use the Table for the Question(s)below