In 2016, venture capital (VC) firm Sequoia Capital was valuing Zoom Video Communications, Inc. (Zoom), then...

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In 2016, venture capital (VC) firm Sequoia Capital was valuing Zoom Video Communications, Inc. ("Zoom"), then a private company. The VC asked its analysts to use the price multiple approach based on price-to-EBITDA and price-to-sales because Zoom's net income was negative. The analysts at Sequoia Capital have identified as a benchmark 20 listed companies in software and communications technology industries. Table below summarizes the relevant information collected: Price to EBITDA per share Price to sales per share Average across 20 comparable firms in software & communication technology 25.0 6.5 Assume that Zoom had EBITDA of $36 million and sales of $120 million, and the number of shares was 20 million shares. Answer questions (a) and (b) below. (Lecture notes pp.68-69) a) Compute Zoom's EBITDA per share and sales per share. Answer (show the steps/calculation toward your results): b) The analysts at Sequoia Capital were asked to estimate the price per share of Zoom's stock using both price-to-EBITDA multiple and price-to-sales multiple, respectively. Therefore, they computed two estimates for the price of Zoom stock. Find the two estimates the analysts would have reported. In case you are unsure about your results in part (a), you can use the following inputs for Zoom: EBITDA per share Zoom = $3 and Sales per shareZoom = $10. In 2016, venture capital (VC) firm Sequoia Capital was valuing Zoom Video Communications, Inc. ("Zoom"), then a private company. The VC asked its analysts to use the price multiple approach based on price-to-EBITDA and price-to-sales because Zoom's net income was negative. The analysts at Sequoia Capital have identified as a benchmark 20 listed companies in software and communications technology industries. Table below summarizes the relevant information collected: Price to EBITDA per share Price to sales per share Average across 20 comparable firms in software & communication technology 25.0 6.5 Assume that Zoom had EBITDA of $36 million and sales of $120 million, and the number of shares was 20 million shares. Answer questions (a) and (b) below. (Lecture notes pp.68-69) a) Compute Zoom's EBITDA per share and sales per share. Answer (show the steps/calculation toward your results): b) The analysts at Sequoia Capital were asked to estimate the price per share of Zoom's stock using both price-to-EBITDA multiple and price-to-sales multiple, respectively. Therefore, they computed two estimates for the price of Zoom stock. Find the two estimates the analysts would have reported. In case you are unsure about your results in part (a), you can use the following inputs for Zoom: EBITDA per share Zoom = $3 and Sales per shareZoom = $10.

Answer rating: 100% (QA)

a To compute Zooms EBITDA per share we divide the EBITDA by the number of shares EBITDA per share EB... View the full answer