ParentCo owns 100% of private CoffeeCo (EBITDA $100M) and 80% of public DonutCo (EBITDA $200M, trading at 5x). ParentCo: 100M shares at $10, $500M debt, $200M cash. What multiple does the market implicitly assign to CoffeeCo?

Question

IBPrep · Accepted Answer

ParentCo TEV = (100 × $10) + $500 − $200 = $1,300M. DonutCo TEV (full) = $200 × 5 = $1,000M.

ParentCo owns 100% of private CoffeeCo (EBITDA $100M) and 80% of public DonutCo (EBITDA $200M, trading at 5x). ParentCo: 100M shares at $10, $500M debt, $200M cash. What multiple does the market implicitly assign to CoffeeCo?

Answer

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