The share price, total number of shares outstanding and most recent EBITDA of listed company X are as follows. It is assumed that X has no interest-bearing debt. Where calculations are required, the process shall also be The process of calculation, if required, shall also be briefly indicated.

• Share price: 2,000 yen
• Number of shares issued: 100 million
• Latest EBITDA: 20 billion yen

1. Calculate the enterprise value (market capitalization) and EBITDA multiple of X.
2. Calculate X's cost of capital if X's EBITDA is assumed to remain at its recent level in the future.

X is considering acquiring Y, a listed company with the following share price, number of shares outstanding and recent EBITDA. Assume that X and Y have different business areas and that the EBITDA of X and Y will remain the same after the acquisition

• Share price: 1,000 yen
• Number of shares issued: 100 million
• Latest EBITDA: 20 billion yen

'X and Y have the same EBITDA, but X's EBITDA multiple is higher than Y's EBITDA multiple, so this acquisition is desirable for X because if X can absorb Y's earnings, it can double X's enterprise value.'

1. According to the FA's explanation above, what are X's EBITDA, EBITDA multiple and enterprise value (market capitalization) after X's acquisition of Y? What is expected to happen to X's EBITDA, EBITDA multiple and enterprise value (gross market value) after the acquisition of Y by X?
2. Based on the FA's explanation above, X decides to acquire Y in a share exchange, with the exchange ratio X is considering allocating 0.6 shares of X to 1 share of Y. What will be the total number of shares outstanding after the acquisition of Y by X in this case? Also, according to the FA's explanation above, what will be the share price at that time? What would be the share price at that time, according to the FA's explanation above?
3. If you are a major shareholder holding 40% of X's shares and your approval or disapproval will determine the success or failure of the share exchange, state whether you are for or against the above share exchange, together with your reasons.

Answer rating: 100% (QA)

Financial Analysis of Xs Acquisition of Y Calculations Enterprise Value Market Capitalization of X Market Capitalization Share Price Number of Shares Outstanding Market Capitalization of X 2000 yensha... View the full answer