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 unlevered price-earnings ratio of Ideko in 2018 is closest to:
A)26.6
B)14.5
C)16.4
D)17.2

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 unlevered price-earnings ratio of Ideko in 2018 is closest to:
A)26.6 
B)14.5 
C)16.4 
D)17.2

Quizplus · Accepted Answer

The continuation unlevered price-earnings ratio is equal to the EBITDA multiple multiplied by the ratio of EBIT to EBITDA. In this case, the EBIT to EBITDA ratio is 1.75 (EBIT of $175 million divided by EBITDA of $100 million). Therefore, the continuation unlevered price-earnings ratio is 9.4 * 1.75 = 16.4.

Use the Tables for the Question(s)below