The Portable MBA in Finance and Accounting, 3rd Edition

620

EXHIBIT 18.12 ACME Manufacturing Inc.: Public

ly Traded Guideline Co. method of valuation.

ACME ($m

illion)

Median

Market Value

Multiple of

Pro Forma

of Invested

Market Value

Weighted

Price Multiple

Guidelines

Amounts

a

Capital

Less: Debt

of Equity

Weight

Avera

ge

Market value of invested capital

to sales

0.54

Sales

$50.29

$27.16

$10.41

$16.75

25%

$ 4.19

Market value of invested capital

to EBITDA

5.80

EBITDA

8.21

47.62

10.41

37.21

25%

9.30

Market value of invested capital

to EBIT

7.26

EBIT

7.21

52.34

10.41

41.93

25%

10.48

Market value of equity to pretax

income

6.72 Pretax income 6.66

N/A

N/A

44.76 25%

11.19

Value of Equity

$35.16

aSee Exhibit 18.5 for 2000 pro forma amounts after valuat

ion adjustments were made.