Time Warner is considering a sale of its publishing division.
The division had earnings EBITDA of $550 million in the most recent year (depreciation was $150 million), growing at an estimated 5 percent a year (you can assume that depreciation grows at the same rate).
The return on capital in the division is 15 percent and the corporate tax r ate is 40 percent.
If the cost of capital for the division is 9 percent, estimate the following:
a. Value/FCFF multiple.
b. Value/EBIT multiple.
c. Value/EBITDA multiple.