The market value of the equity of Ginger, Inc., is $640,000. The balance sheet shows $40,000 in cash and $207,500 in debt, while the income statement has EBIT of $96,500 and a total of $148,500 in depreciation and amortization. What is the enterprise value−EBITDA multiple for this company?

The enterprise value-EBITDA multiple is 3.30

Explanation:

In calculating the enterprise value-EBITDA multiple for Ginger Inc.,the enterprise value and EBITDA value must first of all be established

Enterprise value=Market Capitalization + Market Value of Debt – Cash and Equivalents

In this instance,equity value of $640000 represents the share market capitalization

$207500 book value of debt represents the market value of debt while cash and cash equivalents is $40000

Enterprise value=$640000+$207500-$40000

Enterprise value=$807500

EBITDA is arrived at by adding depreciation and amortization of $148500 to EBIT of $96500

EBITDA=$96500+$148500

EBITDA=$245000

Enterprise value-EBITDA multiple=$807500/$245000

                                                        =3.30

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