Use the information for the question(s) belou. Suppose that Texas Trucking (TT)

Question

Use the information for the question(s) belou. Suppose that Texas Trucking (TT) has earnings per share of $3.45 and EBITA of $45 million. TT also has 5 million st outstanding and debt of $150 million (net of cash). You believe that Oklahoma Logistics and Transport (OLT) comparable to TT in terms of its underlying business, but OLT has no debt. OLT has a P/E of 12.5 and an enterpris value to EBITA multiple of 7. 27) Based upon the price earmings multiple of OLT, the value of a share of Texas Trucking is dlosest to: A) $24.15 B) $27.60 C) $43.10 D) $49.30 nswer- 28) Based upon the enterprise value to EBITA ratio of OLT, the value of a share of Texas Trucking is closest to: A) $82.50 C) $43.10 D) $21.25 B) $33.00 swer_

Explanation / Answer

27.

PE ratio = 12.50

Earnings per share = 3.45

Stock price = 12.50 × $3.45

= $43.12.

Stock price using PE ratio is $43.12.

Option (C) is correct answer.

28.

Enterprise value = EBITDA × EBITDA multiple

= $45 × 7

= $315 million.

Enterprise value is $315 million.

Value of equity = $315 - $150

= $165 million.

Value of equity is $165 million.

Number of share outstanding

Stock price using EBITDA multiple = $165 / 5

= $33

Stock price using EBITDA multiple is $33.

Option (B) is correct answer.

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.