A. Based on the information below, compute P/E, P/BV, EV/EBITDA, EV/Sales ratio for A, B, C, D and industry average ratios (remember to exclude company you're valuing from the average). What can you say about D's relative valuation ?

B. Use the computed industry average P/E ratio from the part to compute the implied price for company D, based on information that D's projected Net Income is $1 million and shares outstanding are still equal to 0.5 million.

C. Assuming the companies have very different capital structures (leverage), which ratio(s) would be better?

D. Why would EV/EBITDA be more informative than EV/Sales?

                                            

Company	A	B	C	D
Price per share	23	29	22	12
Shares outstanding (million)	5	2	1	0.5
Market value of debt net of cash (million)	53	99	13	2
Sales (million)	100	70	45	4
EBITDA (million)	55	24	18	2.1
Net Income (million)	30	12	8	0.7
Earnings growth in %	5	4	6	4
Book Value	80	120	25	4

Answer rating: 100% (QA)

A PE ratio for A B C D and industry average A 2330 077 B 2912 242 C 228 275 D 1207 1714Industry average ABC3 0772422753 203PBV ratio for A B C D and i... View the full answer