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# Calculated EPS

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Problem

Given Best Travel 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.
Financial Information CoachTraveler VirtualExplorer Home World 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?
Shares Outstanding 150,000 600,000 500,000 1,000,000 With the data given, which of the four comparable firms is/are the best comparison firm(s) for this company?
Stock Price \$12.00 \$24.00 \$34.00 \$35.00 Why? Justify your answer through the following appropriate calculations.
Market Capitalization \$1,800,000 \$14,400,000 \$17,000,000 \$35,000,000
Short Term Debt \$15,000 \$- \$200,000 \$-
Long Term Debt \$- \$2,750,000 \$1,245,000 \$-
Cash & Equivalents \$400,000 \$700,000 \$1,500,000 \$4,000,000
Short Term Investments \$90,000 \$600,000 \$250,000 \$5,000,000
EBITDA \$218,100 \$395,300 \$450,000 \$1,540,000
Net Income \$(40,500) \$237,900 \$291,800 \$894,500
Calculated EPS

Solution
Average
Price to Earnings
Enterprise Value
EBITDA multiple
D/E

Best Travel (Given)
EBITDA \$400,000
Cash \$600,000
Long Term Debt \$1,000,000
Net income \$265,000
Shares 300,000
EPS \$0.88

CoachTraveler VirtualExplorer Home World Stay-at-Home Average
Imputed IPO price per share from PE ratio
Impute EV from EBITDA multiples
Owner's equity
Impute IPO price per share

D/E