[I need DETAILED FORMULAS on how each value is being calculated for this questio

Question

[I need DETAILED FORMULAS on how each value is being calculated for this question] Please help.

A Company wants to determine its value multiple. They are estimating a 3 year high-growth period with a starting sales level of $1,250, EBIT of $500, depreciation of $75, tax rate of 35%, and capitalinvested of $700. During the high-growth period, the firm will have a reinvestment rate of 65% and a cost of capital of 9.0%. After the high-growth period, the growth rate will be 3%.

a) Using this information, determine the enterprise value for the company, as well as EV/EBITDA, EV/Cap investment and EV/Sales.
b) What would the impact to the valuations if the tax rate were 40% and the reinvestment rate during the high-growth period was 70%?

Explanation / Answer

Answer:a)

Answer:b)

Formula:

Enterprise Value = Market Value of Equity + Market value of Debt – Cash Holdings

Value/Book Capital = (Market Value of Equity + Market Value of Debt) / (Book Value of Equity + Book Value of Debt)

EV/Invested Capital = (Market Value of Equity + Market Value of Debt - Cash)/ (Book Value of Equity + Book Value of Debt - Cash

Enterprise value $7280.47 EV/EBITDA 12.66 EVEBIT(1-t) 22.4 EV/Capital invested 10.4 EV/sales 5.82

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