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Using the Method of Multiples

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Problem #1

Free Travel, Inc., a company that organizes virtual travel tours, is planning an IPO. Its current investors hold 300,000 shares, which at IPO will be converted into common shares at 1:1 ratio. The company competes with the following publicly traded companies: CoachTraveler, VirtualExplorer, Home World, and Stay-at-Home.

Using the Method of multiples based on both P/E ratio and the enterprise value to EBITDA ratio, at what price should the stock be offered? Use the data from the Table below:

(see attached file for data).

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This solution answers questions using the method of multiples.

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