You are looking to purchase Company A. Your projections for the EBITDA of Company A are as Follows: EBITDA Year 1 $2.0 Year 2 $3.0 Year 3 $3.5 Year 4 $4.0 Year 5 $5.0 Your cost of capital is 20%. Your investment banker shows you the EBITDA multiples for the following comparable companies: Company x 5.0x
You are looking to purchase Company A. Your projections for the EBITDA of Company A are as Follows: EBITDA Year 1 $2.0 Year 2 $3.0 Year 3 $3.5 Year 4 $4.0 Year 5 $5.0 Your cost of capital is 20%. Your investment banker shows you the EBITDA multiples for the following comparable companies: Company x 5.0x
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![You are looking to purchase Company A. Your projections for the EBITDA of Company A are as
follows:
EBITDA
$21.51
Year 1
$2.0
O $19.77
$21.78
Your cost of capital is 20%.
Your investment banker shows you the EBITDA multiples for the following comparable companies:
Company x 5.0x
Company y 5.50x
Company z 6.0x
Year 2
$3.0
Given the above information what is the price that you would like to offer to Company A
shareholders?
Not enough information
Year 3
$3.5
None of the above
Year 4
$4.0
Year 5
$5.0](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F360e0a92-702c-44a9-8089-d453dee89ca1%2F1ff070e2-9d1b-4032-8127-b86ec370f9f1%2Fb0rvvna_processed.png&w=3840&q=75)
Transcribed Image Text:You are looking to purchase Company A. Your projections for the EBITDA of Company A are as
follows:
EBITDA
$21.51
Year 1
$2.0
O $19.77
$21.78
Your cost of capital is 20%.
Your investment banker shows you the EBITDA multiples for the following comparable companies:
Company x 5.0x
Company y 5.50x
Company z 6.0x
Year 2
$3.0
Given the above information what is the price that you would like to offer to Company A
shareholders?
Not enough information
Year 3
$3.5
None of the above
Year 4
$4.0
Year 5
$5.0
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