Session 14: Equity Analysis and Valuation
Reading 60: Equity Valuation: Concepts and Basic Tools
LOS i: Explain the use of enterprise value multiples in equity valuation and demonstrate the use of enterprise value multiples to estimate equity value.
An analyst studying Albion Industries determines that the average EV/EBITDA ratio for Albion’s industry is 10. The analyst obtains the following information from Albion’s financial statements:
EBITDA = ￡11,000,000
Market value of debt = ￡30,000,000
Cash = ￡1,000,000
Based on the industry’s average enterprise value multiple, what is the equity value of Albion Industries?
Enterprise value = Average EV/EBITDA × company EBITDA = 10 × ￡11,000,000 = ￡110,000,000
Enterprise value = Equity value + debt ? cash
Equity value = Enterprise value ? debt + cash = ￡110,000,000 ? ￡30,000,000 + ￡1,000,000 = ￡81,000,000
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发表于 2011-3-30 12:04
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