Jorge Zaldys, CFA, is researching the relative valuation of two companies in the aerospace/

defense industry, NCI Heavy Industries (NCI) and Relay Group International (RGI ). He has gathered relevant information on the companies in the following table.

Using the information in the table, answer the following questions:
A. C alculate P/EBITDA for NCI and RGI .
B. C alculate EV/EBITDA for NCI and RGI .
C. Which company should Zaldys recommend as relatively undervalued? Justify the selection.

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EBITDA Comparisons (in Millions except Per-Share and Share-Count Data) Company RGI NCI Price per share 150 100 Shares outstanding 5 million 2 million Market value of debt 50 100 Book value of debt 52 112 Cash and investments 5 2 Net income 49.5 12 Net income from continuing operations 49.5 8 Interest expense 3 Si 5 Depreciation and amortization 8 4 Taxes 2 3