Valuing a firm off EBITDA
A firm with EBITDA of 1.27m/yr and tax rate of 35%. All equity financed, 10% WACC. What is the firm value? I'm confused because I normally use EBIT, but have no information on D&A
assuming no growth--> (1.27(1+0)(1-.35))/(.1-0)=8.255MM
dont over think it. The point of the question is probably to see if you know how to do the most basic dcf. For a sanity check--> 8.255/1.27=6.5x seems reasonable
If growth is zero and its a mature company, D&A should be offset by capex on a cash basis. Assuming theres no change in NWC as well.
Great, thanks. I was thinking to much into it
Why use the perpetuity formula? Surely that will only calculate the terminal value not the full value of the company.
The assumption is that they will make 1.27mm ebitda each year for perpetuity. Read the question again
hang on, where is this mentioned? Would you just mind explaining your methodology behind this answer, thats all I am after
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