A company has P/E of 20x, EV/EBITDA of 10x, interest expense of $20M (at a 5% rate), $20M of D&A, and market cap of $200M. What's the tax rate?

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IBPrep · Accepted Answer

Debt = Interest / Rate = $20 / 5% = $400M. TEV = Debt + Equity = $400 + $200 = $600M. EBITDA = TEV / 10 = $60M. EBIT = EBITDA - D&A = $60 - $20 = $40M. EBT = EBIT - Interest = $40 - $20 = $20M. NI = Market cap / P/E = $200 / 20 = $10M. Taxes = EBT - NI = $20 - $10 = $10M. Tax rate = $10 / $20 = 50%.

A company has P/E of 20x, EV/EBITDA of 10x, interest expense of $20M (at a 5% rate), $20M of D&A, and market cap of $200M. What's the tax rate?

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