This is a problem in illustrating where the valuation multiples comes from, rather than just using multiples you are given. We will valuation operating metrics. The elderly chairman and major shareholder of Orono Health is considering selling his stake in the HMO. He has asked to value the equality in the firm by this afternoon. Thus we need a quick valuation. We have gathered information on two public HMO's operating in the same region. Current data is: Orono Health Valuation (All number in millions except # members and price per share which are actual) BVE is book value of equity. We will assume the book value of debt is close to the market value and will use it as the value of interest bearing debt. Enterprise value = equity + interest bearing debt. (We are assuming no excess cash.) Please calculate EPS and the following multiples (you have both equity multiples and firm value multiples) for Bangor Healthcare and Pine Tree Healthcare: P/E = MVENI MVE/BV Firm value/EBITDA Firm value/SALES Firm value/#Members Using a simple average of Bangor Healthcare and Pine Tree Healthcare, use each multiple to calculate an implied equity value of Orono Health. (For the firm value multiples first calculate an enterprise value and then subtract out value of debt) Comment on these valuations as a whole; are there any you might discard (please why)? What is a reasonable range of value explain for Orono Health equity? Because a private firm is less liquid than a public firm, an analyst might discount the equity value for a marketability discount. Assume a 20% discount (of equity value) is appropriate. What is the value range now