GROUP 1 BLK 2 REPORT – TYPES OF VALUATION MULTIPLES

THEORIES AND CONCEPTS

1. Statement 1. Valuation multiples represent a single instance of a firm’s status.

Statement 2. Valuation multiples reflect long-term data instead of short-term.

a. Statement 1 is true and statement 2 is false

b. Statement 1 is false and statement 2 is true
c. Both statements are false
d. Both statements are true

2. Statement 1. Valuation multiples are ir relevant because they revolve

around crucial statistics.
Statement 2. Valuation multiples helps to make sound judgement.
a. Statement 1 is true and statement 2 is false
b. Statement 1 is false and statement 2 is true
c. Both statements are false
d. Both statements are true

3. Statement 1. Using valuation multiple, it makes different company more

comparable.
Statement 2. Valuation multiples reflect short-term data instead of long-term.

a. Statement 1 is true and statement 2 is false

b. Statement 1 is false and statement 2 is true
c. Both statements are false
d. Both statements are true

4. A ratio used to determine the value of company and it is the most appropriate tool
to merger and acquisitions.

a. Equity Multiple
b. EV/Sales
c. Enterprise Value Multiple
d. EV/Revenue
5. The choice of multiple(s) in valuing and comparing companies depends on the
nature of the business or the industry in which the business operates.
TRUE
FALSE
6. This ratio is used as a valuation metric to compare different companies in the same
or similar sector.

a. EV/EBITDA
b. Dividend Yield
c. EV/EBITDAR
d. P/E

7. Betty calculated their company value using EV/EBITDA multiple, she found out
the ratio of enterprise value to earnings before interest, taxes, depreciation and
amortization is 20.62. Is their company has a healthy EV/EBITDA ratio? Why?

a. No, because the healthy EV/EBITDA ratio is above 10.

b. Yes, because the healthy EV/EVITDAR ratio is less than 10.
c. No, because the healthy EV/EBITDA ratio is ranges from 1× and 3×
d. Yes, because the healthy EV/EVITDA ratio is less than 10.

8. Most appropriate multiple for companies with positive operating income, service-
based businesses (low capital intensive firms) and business with varying levels of
capital intensity.

a. EV/EBIT
b. Free Cash Flow
c. EV/Invested Capital
d. EV/EBITDA

9. Investment decisions make use of _____________ especially when investors look

to acquire minor positions in companies.

a. P/E Ratio
b. P/B Ratio
c. Equity Multiples
d. Enterprise Value (EV) Multiples

10. This kind of equity multiple is commonly use in comparing two or more company
with similar goods or stocks that produce or sell.

a. P/E Ratio
 b. Dividend Yield
c. Price/Sale Ratio
d. P/B Ratio

11. When Dividend Yield goes up the _________ goes down.

a. Annual Dividend
b. Price
c. Stock price
d. Annual Revenue

12. __________ is a measure of how much the company will worth today to sold their
asset and payback all the liabilities.

a. Dividend Yield
b. Book Value
c. P/E Ratio
d. Price/ Sale Ratio

13. It is a kind of equity multiples that compares company stock price to annual sales
per year.

a. P/E Ratio
b. P/B Ratio
c. Dividend Yield
d. Price/Sale Ratio

14. Statement 1. Comparable Company Analysis is method that analyzes past mergers
and acquisitions (M&A) for companies in the same industry, which can be used as
a reference point for the company that is being valued.

Statement 2. Precedent M&A Transactions is method analyzes public companies

that are similar to the company being valued. An analyst will gather share prices,
market capitalization, capital structure, revenue, EBITDA, and earnings for each
company.

a. Statement 1 is true and statement 2 is false

b. Statement 1 is false and statement 2 is true
c. Both statements are false
d. Both statements are true
SOLVING

15. ENCHANTED Company reports a sales for the year of 80M. The company has
15M of short-term liabilities and 20M of long term liabilities. It has $90M worth of
assets, and the 25% of it is cash. Lastly, the company has 5M shares of common
stock outstanding and the current price of the stock is 25 per share. Calculate the
enterprise value and EV/Revenue of ENCHANTED Company.
Solution:
EV = Equity Value ( 5M shares × 25 stock price ) + Total Debt (15M + 20M) -
Cash (90M × 20%)
= 125M + 35 - 18M
= 178M

EV/Sales = 178M/80M = 2.23

a. 178,000,000; 2.33
b. 187,000,000; 3.00
c. 187,000,000; 2.23
d. 178,000,000; 2.23

16. The following are the information from ABC Company;

Stock Price = 50
Profit per year = 120,000
Shares: 60,000
What is the EPS Ratio of Company ABC?
a. 2
b. 3
c. 6
d. 8

17. Based on the information and your answer in number 16, what is the P/E Ratio of
Company ABC?

a. 34
b. 24
 c. 25
d. 31

18. The following are the information from XYZ Company;

Annual Dividend = 25
Current Stock price = 400
What is the Dividend Yield of XYZ Company?
a. 20%
b. 43%
c. 21%
d. 6.25%

19. Based on the information and your answer in number 18, what is the Earnings of
XYZ Company?

a. 20%
b. 21%
c. 25%
d. 24%

20. The following are the information from DOG Company;

Price = 42
Book Value = 140M
Shares = 10M
Book Value Per Share = 14
What is the P/B Ratio of DOG Company?
a. 1
b. 2
c. 3
d. 4