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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
You are valuing multiple steady-state companies in the same industry. Company Ais projected to earn $160 million in EBITA next year, grow at 2 percent per year, and generate ROICs equal to 15 percent. Company C is projected to earn $160 million in EBITA next year, grow at 5 percent per year, and generate ROICs equal to 12 percent. Both companies have an operating tax rate of 25 percent and a cost of capital of 10 percent. What are the enterprisevalue-to-EBITA multiples for both companies? Does higher growth lead to a higher multiple in this case? Why do the results in Questions 5 and 6 differ?
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