Using the industry average EV/EBITDA multiple I’ve valued my firm at $25 000 000 My (normalized) EBITDA last

Question

Using the industry average EV/EBITDA muiple, I’ve valued my firm at $25,000,000. My (normalized) EBITDA last

year was $1,000,000, and the industry average EBITDA muiple is 25x. My firm is a small, private entity.

Which of the following statements is true?

Question 5 options:

None of these statements are correct.

You can expect your enterprise value to be at least 20% lower than what is calculated, since the firm is private.

The figure you arrived at ($25 million) is an equity value, not enterprise value.

Proper use of the EBITDA muiple in this context is division: your firm is actually worth $40,000.

EBITDA for your firm should not be normalized; this is done only at the industry level.

Finance