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 $640 million, EBITDA of $84 million, excess cash of $67 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) $6.27 to $8.86
B) $4.59 to $12.23
C) $1.15 to $1.53
D) $6.19 to $9.32

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 $640 million, EBITDA of $84 million, excess cash of $67 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) $6.27 to $8.86 
B) $4.59 to $12.23 
C) $1.15 to $1.53 
D) $6.19 to $9.32

Quizplus · Accepted Answer

A) Enterprise Value = 1.35 × $640 = $864 million; P₀ = ($864 million + $67 million - $14 million) / 120 = $7.64 Range is from 82% to 116% of estimate. $7.64 × 0.82 = $6.27; $7.64 × 1.16 = $8.86

Use the Table for the Question(s) Below