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CSH has EBITDA of $4 million. You feel that an appropriate​ EV/EBITDA ratio for CSH is...

CSH has EBITDA of $4 million. You feel that an appropriate​ EV/EBITDA ratio for CSH is 7. CSH has $6 million in​ debt,$4 million in​ cash, and 775,000 shares outstanding. What is your estimate of​ CSH's stock​ price? The estimate of​ CSH's stock price is? (Round to the nearest​ cent.)

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Answer #1

EV refers to Enterprise value means Equity value + Debt - Cash i.e. Equtiy + net debt

CSH has EV/EBITDA ratio 7 and EBITDA is $4 million.

So, CSH have Enterprise value 7*$4 = $ 28 million

Enterprise Value = Equity Value + Debt - Cash

$28 million = Equity value + $6 million - $4 million

Equtiy Value = $ 26 million

No. of shares * Stock Price = $26 million

775000 * Stock Price = $26 million

Stock Price = $33.54

So, The estimated stock price is $ 33.54 per share.

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