Interview Question- Equity Value
Company trading @ 5x EV/EBITDA & has 50mm EBITDA w/ 200mm in senior secured and 100mm in bonds, what is its equity value? THANK YOU!
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Since EBITDA is 50M, that means EV is 50*5 = 250M. Since senior secured and bonds are different forms of debt, they will be subtracted from EV. Since 250- 200-100 = -50 equity value, it is likely that the market value of debt is lower than the book value and is not actually 300M. So the answer should be 0 as you can't have a negative equity value.
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