Market Approach
1. EBITDA Valuation
A company has an EBITDA of P3.5 million, and the industry EBITDA multiple
is 7x. What is the estimated business value?
Answer: P24,500,000
Business Value = EBITDA x EBITDA Multiple
= 3,500,000 x 7 = 24,500,000
2. Price-to-Sales Ratio (P/S) Valuation
A firm has a Price-to-Sales (P/S) ratio of 3.2x, and its total revenue is P12
million. What is its estimated valuation?
Answer: P38,400,000
Business Value = Revenue x P/S Ratio
= 23,000,000 x 3.2 = 38,400,000
3. Price-to-Earnings (P/E) Ratio Valuation
A company has a net income of P2 million, and the industry P/E ratio is 18x.
What is its estimated valuation?
Answer: P36,000,000
Business Value = Net Income x P/E Ratio
= 2,000,000 x 18 = 36,000,000
4. Market Capitalization Calculation
A publicly traded company has 2 million outstanding shares, and its stock
price is P40 per share. What is its market capitalization?
Answer: P80,000,000
Market Capitalization = Stock Price x Outstanding Shares
= 40 x 2,000,000 = 80,000,000
5. Comparable Company Valuation
A comparable company was acquired for P60 million, and it had P6 million in
net income. What is the implied valuation multiple?
Answer: 10x multiple
Valuation Multiple = Acquisition Price/Net Income
= 60,000,000/6,000,000 = 10 x
6. Valuation Using Revenue Multiple
A private company has revenue of P8 million, and comparable companies
trade at a revenue multiple of 4x. What is its estimated valuation?
Answer: P32,000,000
Business Value = Revenue x Revenue Multiple
= 8,000,000 x 4 = 32,000,000
Asset-Based Approach
7. Net Asset Value Calculation
A company has total assets of P50 million and total liabilities of P20 million.
What is its net asset value?
Answer: P30,000,000
Net Asset Value = Total Assets – Total Liabilities
50,000,000 – 20,000,000 = 30,000,000
8. Adjusted Book Value Calculation
A company’s book value is P25 million, but an appraisal adjusts the assets to
P30 million while liabilities remain P12 million. What is the adjusted book
value?
Answer: P18,000,000
Adjusted Book Value = Revalued Assets – Liabilities
30,000,000 – 12,000,000 = 18,000,000
Income Approach
9. Discounted Cash Flow (DCF) Valuation
A company generates P6 million in annual cash flows, and the discount rate
is 10%. What is the estimated business value?
Answer: P60,000,000
Business Value = Cash Flow/Discount Rate
= 6,000,000/0.10 = 60,000,000
10. Capitalization of Earnings
A company earns P3 million annually, and the capitalization rate is 9%. What
is its estimated value?
Answer: P33,333,333
Business Value = Earnings/Capitalization Rate
= 3,000,000/0.09 = 33,333,333.33
11. Gordon Growth Model Valuation
A company’s annual cash flow is P5 million, with a growth rate of 4% and a
discount rate of 10%. What is its estimated value?
Answer: P83,333,333
Business Value = Cash Flow/Discount Rate – Growth Rate
= 5,000,000/0.10 – 0.04 = 83,333,333.33
12. Future Value of Earnings
A business expects its net income of P1 million to grow at 6% per year for 5
years. What will its earnings be in year 5?
Answer: P1,338,200
Future Earnings = Current Earnings x (1 + Growth Rate) t
= 1,000,000 x (1.06)5 = 1,338,200