The market value of the equity of ginger, inc., is $635,000. the balance sheet shows $39,000 in cash and $215,000 in debt, while the income statement has ebit of $96,400 and a total of $168,000 in depreciation and amortization. what is the enterprise value–ebitda multiple for this company? the market value of the equity of ginger, inc., is $635,000. the balance sheet shows $39,000 in cash and $215,000 in debt, while the income statement has ebit of $96,400 and a total of $168,000 in depreciation and amortization. what is the enterprise value–ebitda multiple for this company?

EBITDA Multiple = 3,067

Explanation:

The EBITDA multiple is a financial ratio that compares a company’s Enterprise Value to its annual EBITDA. This multiple is used to determine the value of a company and compare it to the value of other, similar businesses. The ratio takes a company’s enterprise value (which represents market capitalization plus net debt) and compares it to the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for a given period.

Formula:

EBITDA Multiple = Enterprise Value / EBITDA

To Determine the Enterprise Value and EBITDA:

Enterprise Value = (market capitalization + value of debt + minority interest + preferred shares) – (cash and cash equivalents)

EBITDA = Earnings Before Tax + Interest + Depreciation + Amortization

In this exercise:

Enterprise Value= market value + value of debt - cash= 635000+ 215000 - 39000=$811000

Ebitda= ebit + depreciation and amortization = 96400+168000= $264400

EBITDA Multiple = Enterprise Value / EBITDA=811000/264400=3,067

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