262
Chapter 19
Valuation and Financial Modeling:
A Case Study
19–1. You would like to compare Ideko’s profitability to its competitors’ profitability using the
EBITDA/sales multiple. Given Ideko’s current sales of $75.6 million, use the information in
Table 19.2 to compute a range of EBITDA for Ideko assuming it is run as profitably as its
competitors.
Ideko’s 2005 sales are $75.6 million.
Find the highest and lowest EBITDA values across all three firms and the industry as a whole:
EBITDA/Sales (%) EBITDA ($ mil)
Oakley 17.0 12.85
19–2. Assume that Ideko’s market share will increase by 0.4% per year rather than the 1% used in the
chapter. What production capacity will Ideko require each year? When will an expansion
become necessary (when production volume will exceed the current level by 50%)?
First compute the projected annual market share:
Year
Growth/Year
2005
2006
2007
2008
2009
2010
Market Size (000 units)
5.00%
10,000,00
10,500,00
11,025,00
11,576,25
12,155,06
12,762,82
Market Share
0.40%
10.00%
10.40%
10.80%
11.20%
11.60%
12.00%
Average Sales Price
($/unit)
2.00%
75.00
76.50
78.03
79.59
81.18
82.81
Production Volume
1,000,00
1,092,00
1,190,70
1,296,54
1,409,99
1,531,54
Based on these estimates, it will be 2010 before current capacity is exceeded and an expansion
becomes necessary, approximately $10 million.
