NISM Certifications · NISM-Series-XV: Research Analyst · Valuation Principles
Company X has an enterprise value of Rs 5,000 crore, cash of Rs 400 crore, total debt of Rs 1,400 crore and 50 crore shares outstanding. EBITDA is Rs 625 crore. What are the EV/EBITDA multiple and the equity value per share respectively?
The EV/EBITDA multiple is 8.0 times and equity value per share is Rs 80. Dividing EV of 5,000 by EBITDA of 625 gives 8. Equity equals EV minus debt plus cash, which is 4,000 crore, divided by 50 crore shares.
- A8.0 times and Rs 80Correct
- B8.0 times and Rs 92
- C8.8 times and Rs 80
- D7.2 times and Rs 92
Explanation
EV/EBITDA = 5000/625 = 8.0. Equity value = EV - debt + cash = 5000 - 1400 + 400 = 4000 crore; per share = 4000/50 = Rs 80. Rs 92 comes from subtracting only net of wrong sign (5000 - 400 ... adding debt mistakes), and 8.8 is not derived from the data.
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