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You are an analyst at a firm that buys private companies improves their operating  performance and sells them for a profit Your boss has asked you to estimate the fair  market value of the Macchina

You are an analyst at a firm that buys private companies, improves their operating 
performance and sells them for a profit. Your boss has asked you to estimate the fair 
market value of the Macchina Utensile S.p.A. The Macchina Utensile’s income 
statement from the fiscal year that ended this past December is:
Revenue                                                            €995
Cost of goods sold                                              652
Gross profit                                                         €343
Selling, general, & administrative expenses       135
Operating profit (EBIT)                                        €208
Interest expense                                                   48
Earnings before taxes                                         €160
Taxes                                                                    64
Net income                                                           € 96


All values are in millions of euros. Depreciation and amortisation expenses last year 
were €42 million and the company has €533 million of debt outstanding.
Milan Ingeneria S.p.A. is a public company with business operations that are virtually
identical to those at Macchina Utensile. The income statement for this company, 
Milan Ingeneria for the fiscal year that ended this past December is as follows:


Revenue                                                                 €1,764
Cost of goods sold                                                  1,168
Gross profit                                                              € 596
Selling, general, & administrative expenses            211
Operating profit (EBIT)                                            € 385
Interest expense                                                       12
Earnings before taxes                                             € 373
Taxes                                                                       147
Net income € 226All values are in millions. Milan Ingeneria had depreciation and amortisation 
expenses of €71 million last year and 200 million shares and €600 million of debt 
outstanding as of the end of the year. Its shares are currently trading at €12.25.
Required:
a. Using the P/E multiple, what is the value of Macchina Utensile shares? What is 
the total value of Macchina Utensile company?
b. Using the enterprise value/EBITDA multiple, what is the total value of Macchina 
Utensile S.p.A.? What is the value of Macchina Utensile’shares?
c. Which of the above multiple analyses do you believe is more appropriate?

Apr 16 2021 View more View Less

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