Use the tables for the question(s)below.
Pro Forma Income Statement for Ideko, 2013-2018
Pro Forma Assets & Liabilities for Ideko, 2013-2018

-Assuming that Ideko has a EBITDA multiple of 9.4, then the continuation EV/Sales ratio of Ideko in 2018 is closest to:
A)1.8
B)1.9
C)1.6
D)1.7

Question

Use the tables for the question(s)below.
Pro Forma Income Statement for Ideko, 2013-2018
  Pro Forma Assets & Liabilities for Ideko, 2013-2018
 
-Assuming that Ideko has a EBITDA multiple of 9.4, then the continuation EV/Sales ratio of Ideko in 2018 is closest to:
A)1.8 
B)1.9 
C)1.6 
D)1.7

Quizplus · Accepted Answer

To find the continuation EV/Sales ratio, we first need to find the Enterprise Value (EV) for Ideko in 2018. We can use the EBITDA multiple of 9.4 to calculate EV.

EV = EBITDA * EBITDA multiple
EV = $58,800 * 9.4
EV = $553,920

Next, we can use the Pro Forma Assets & Liabilities table to find the Total Assets and Total Liabilities for Ideko in 2018.

Total Assets = $450,000
Total Liabilities = $270,000

We can use these values to find the Shareholders' Equity.

Shareholders' Equity = Total Assets - Total Liabilities
Shareholders' Equity = $450,000 - $270,000
Shareholders' Equity = $180,000

Finally, we can use the EV and Shareholders' Equity to find the continuation EV/Sales ratio.

Continuation EV/Sales = EV / Sales
Continuation EV/Sales = EV / Net Sales
Continuation EV/Sales = (EV + Shareholders' Equity) / Net Sales
Continuation EV/Sales = ($553,920 + $180,000) / $450,000
Continuation EV/Sales = 1.86267...

The closest answer choice is B) 1.9.

Use the Tables for the Question(s)below