1. Exhibit 14.12 presents' market and pro?t data for three companies.
Using this data, compute enterprise-value-to-EBITDA and enterprise-value-to-EBITA for Companies 1 and 2.
Is the net difference between Company 1 and Company 2 the same for both ratios? If not, why might this be?
2. You are valuing multiple steady-state companies in the same industry.
Company A is projected to earn $160 in EBITA, grow at 2 percent per year, and generate ROICs equal to 15 percent.
Company B is projected to earn $100 in EBITA, grow at 6 percent per year, and generate ROICs equal to 10 percent.
Both companies have an operating tax rate of 25 percent and a cost of capital of 10 percent.
What are the enterprise-value-to-EBITA multiples for both companies? Does higher growth lead to a higher multiple in this case?