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CA Final · Advanced Financial Management · Business Valuation

Kaveri Foods Ltd has an equity market capitalisation of Rs 400 crore, debt of Rs 150 crore and cash of Rs 50 crore. Its EBITDA is Rs 80 crore. Enterprise value is computed as market capitalisation plus debt less cash. What is its EV/EBITDA multiple?

The EV/EBITDA multiple is 6.25 times. Enterprise value equals market capitalisation Rs 400 crore plus debt Rs 150 crore less cash Rs 50 crore, which is Rs 500 crore, and dividing by EBITDA of Rs 80 crore gives 6.25.

  1. A5.0 times
  2. B6.25 timesCorrect
  3. C6.875 times
  4. D7.5 times

Explanation

EV = 400 + 150 - 50 = Rs 500 crore. EV/EBITDA = 500/80 = 6.25. The 5.0 option uses market cap alone (400/80). The 6.875 option adds cash instead of deducting it (600/80 = 7.5 is the other error; 550/80 = 6.875 ignores cash but adds debt only).

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