Use the Table for the Question(s)below

question 4

Multiple Choice

Use the table for the question(s) below. Name Market Enterprise Enterprise Enterprise
Capitalization Value Price/ Value/ Value/
($ million) ($ million) P/E Book Sales EBITDA
Gannet 6350 10,163 7.36 0.73 1.4 5.04
New York Times 2423 3472 18.09 2.64 1.10 7.21
McClatchy 675 3061 9.76 1.68 1.40 5.64
Media General 326 1192 14.89 0.39 1.31 7.65
Lee Enterprises 267 1724 6.55 0.82 1.57 6.65
Average 11.33 1.25 1.35 6.44
Maximum +60% 112% +16% +22%
Minimum -40% -69% -18% -19%
The table above shows the stock prices and multiples for a number of firms in the newspaper publishing industry. Another newspaper publishing firm (not shown) had sales of $600 million, EBITDA of $84 million, excess cash of $68 million, $18 million of debt, and 120 million shares outstanding. If the average enterprise value to sales for comparable businesses is used, which of the following is the best estimate of the firm's share price?

• A)$6.45
• B)$7.20
• C)$7.17
• D)$7.53

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Definitions:

Business Partner

An individual or entity that enters into a business relationship with another to pursue mutual goals and interests, often sharing profits, losses, and control.

Bankruptcy Proceedings

A legal process through which individuals or businesses unable to repay their debts may seek relief and undergo a structured repayment or asset liquidation process.

Insolvent

The state of being unable to pay debts owed, often leading to legal proceedings for liquidation or restructuring.

Chapter 7 Bankruptcy

A legal process under U.S. bankruptcy law for liquidating a debtor's assets to pay off creditors.