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Russell's has annual revenue of $387,000 with costs of $216,400. Depreciation is $48,900 and the tax rate is 30 percent. The firm has debt outstanding with a market value of $182,000 along with 9,500 shares of stock that is selling at $67 a share. The firm has $48,000 of cash of which $29,500 is needed to run the business. What is the firm's EV/EBITDA ratio

Answer :

Answer: EV/EBITDA = 4.69

Explanation:

Given that,

Annual revenue = $387,000

Costs = $216,400

Depreciation = $48,900

Tax rate = 30 percent

Debt outstanding with a market value = $182,000

9,500 shares of stock that is selling at $67 a share

Cash = $48,000

EV/EBITDA = [tex]\frac{O/S\ Debt\ +\ Shares\ value\ -\ (cash\ left)}{Annual\ revenue\ -\ costs}[/tex]

EV/EBITDA = [tex]\frac{182,000\ +\ (9,500\ \times 67) - (48,000\ -\ 29,500)}{387,000\ -\ 216,400}[/tex]

EV/EBITDA = [tex]\frac{800,000}{170,600}[/tex]

EV/EBITDA = 4.69

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