What is CVS's Enterprise Value to EBITDA multiple?

What is the Enterprise Value to EBITDA multiple for CVS based on the given data?

Calculation of CVS's Enterprise Value to EBITDA multiple

The Enterprise Value to EBITDA multiple for CVS is 7. The correct answer is option A.

Explanation:

Enterprise Value (EV) is defined as the total value of the company, both debt, and equity capital. Therefore, in order to calculate Enterprise Value to EBITDA multiple, we need to take into account the following formula:

EV = Market value of equity + Debt – Cash

Market value of equity = 5 million shares x $43 per share = $215 million

Debt = $100 million

Cash = $23 million

EV = Market value of equity + Debt - Cash

EV = $215 million + $100 million - $23 million = $292 million

Next, we need to calculate EBITDA:

EBITDA = $45 million

The Enterprise Value to EBITDA multiple can be calculated by dividing EV by EBITDA:

EBITDA multiple = EV/EBITDA

= $292 million / $45 million

= 6.49 ~ 7 (rounded to the nearest whole number)

Therefore, the closest multiple to CVS's Enterprise Value to EBITDA multiple is 7 i.e. option A.