Smile is a social media site that is growing in popularity. The firm has been around for a few years and has created a nice market niche for itself. Now the company has a possible buyer who has made an offer. The CEO of Smile is your friend and has asked for your help in calculating the value of the company by using relative valuation with multiples from comparable companies. Last year's Sales for Smile was $645 million and they had an EBITDA of $96.75 million.

Using the data provided below, what is your estimate of the Price for Smile using the EBITDA multiple?

For that, you have collected the following data on social media companies:

PRECEDENT TRANSACTIONS ANALYSIS

All figures are in $000's

Target Company Date Sales EBITDA EBITDA/Sales Price AAA 2008 $1,200,000 $312,000 26.00% $3,744,000 ZZZ 2009 $800,000 $144,000 18.00% 1,584,000 LLL 2012 $5,600,000 $336,000 6.00% 3,024,000 DDD 2016 $480,000 $67,200 14.00% 672,000 CCC 2019 $975,000 $87,750 9.00% 702,000

a) $645 million

b) $967.5 million

c) $1,945.2 million

d) $189.39 million

Answer rating: 100% (QA)

To estimate the price for Smile using the EBITDA multiple we first need to calcula... View the full answer