Question: You are valuing multiple steady-state companies in the same industry. Company A is projected to earn $160 in EBITA, grow at 2 percent per year,

You are valuing multiple steady-state companies in the same industry. Company A is projected to earn $160 in EBITA, grow at 2 percent per year, and generate ROICs equal to 15 percent. Company B is projected to earn $100 in EBITA, grow at 6 percent per year, and generate ROICs equal to 10 percent. Both companies have an operating tax rate of 25 percent and a cost of capital of 10 percent. What are the etnerprise-value-to-EBITA multiples for both companies? Does higher growth lead to a higher multiple in this case?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Laker Company reported the following January purchases and sales data for its only product. The Company uses a perpetual inventory system. For specific identification, ending inventory consists of...

You are valuing multiple steady-state companies in the same industry. Company A is projected to earn $160 million in EBIT next year, grow at 2 percent per year, and generate ROICS equal to 15...

3 . You are valuing multiple steady - state companies in the same industry. Company A is projected to earn $ 1 6 0 in EBITA, grow at 2 percent per year, and generate ROICs equal to 1 5 percent....

You are valuing multiple steady-state companies in the same industry. Company A id projected to earn $160 million in EBITA next year, grow at 2 percent per year, and generate ROICs equal to 15...

2. You are valuing multiple steady-state companies in the same industry. Company A is projected to earn $160 in EBITA, grow at 2 percent per year, and generate ROICs equal to 15 percent. Company B is...

a) You are valuing multiple steady-state companies in the same industry. Company A is projected to earn $160 million in EBITA next year, grow at 2% per year, and generate ROICs equal to 15%. Company...

You are valuing multiple steady-state companies in the same industry. Company A is projected to earn $160 in EBITA, grow at 2 percent per year, and generate ROICs equal to 15 percent. Company C is...

You are valuing multiple steady-state companies in the same industry. Company A is projected to earn $160 million in EBITA next year, grow at 2% per year, and generate ROICS equal to 15%. Company B...

You are valuing multiple steady-state companies in the same industry. Company A is projected to earn $160 in EBITA, grow at 2 percent per year, and generate ROICs equal to 15 percent. Company B is...

5. You are valuingmultiple steady-state companies in the same industry. CompanyAis projected to earn $160 million in EBITAnext year, growat 2 percent per year, and generate ROICs equal to 15 percent....

2) A f funciton whose one of reduced representation is f(x1,x2,x3,x4,x5)=x1x2x4x5+x1x3x4x5+x1x2x4x5+x2x3 will be implemented using 2-selection input MUX and AND, OR, NOT gates if needed. Implement f...

The Armys traveling Virtual Army Experience was deemed to be effective and won numerous awards. In analyzing the success of this effort, consider the following questions: 1. What made the Armys...

(Appendix 5B) Value-Stream Product Costing, ABC, and DBC Brasher Company is transitioning to a lean manufacturing system and has just finalized two order fulfillment value streams. One of the value...

https://media.cheggcdn.com/media/e59/e5900ba1-02b0-44ab-8246-fb980e24e7c1/phpDkQ6Ux

LO1.5 List the categories of scarce resources and delineate the nature of societys economizing problem.

LO1.4 Explain the individuals economizing problem and how trade-offs, opportunity costs, and attainable combinations can be illustrated with budget lines.

=+productivity depends on growth in total factor productivity and growth in the capitallabor ratio. In particular, show that D1Y/L2 Y/L = DA A + a D1K/L2 K/L .