Answer-first summary for fast verification
Answer: 32.2
## Calculation of Conglomerate Discount ### Step 1: Calculate Sum-of-the-Parts (SOTP) Value **Segment Y Valuation:** - Uses EV/EBITDA multiple: 10.8x - EBITDA: $9.0 million - Enterprise Value = 10.8 × 9.0 = $97.2 million **Segment Z Valuation:** - Uses EV/Sales multiple: 2.5x - Sales: $48.0 million - Enterprise Value = 2.5 × 48.0 = $120.0 million **Total SOTP Enterprise Value:** - $97.2 million + $120.0 million = $217.2 million ### Step 2: Calculate Actual Enterprise Value - Market Value of Equity: $130 million - Net Debt: $10 million - Enterprise Value = Market Value of Equity + Net Debt - EV = $130 million + $10 million = $140 million ### Step 3: Calculate Conglomerate Discount - Conglomerate Discount = SOTP Value - Actual Enterprise Value - Discount = $217.2 million - $140.0 million = $77.2 million ### Step 4: Verify Answer Options - A. 32.2 (incorrect) - B. 77.2 (correct) - C. 97.2 (incorrect - this is Segment Y's valuation) **The conglomerate discount is $77.2 million, which corresponds to option B.**
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39 An analyst gathers the following data about a conglomerate with two segments (Segment Y and Segment Z) and compares the data with its peers.
| Segment Y | Segment Z | |
|---|---|---|
| Sales (in $ millions) | 60.0 | 48.0 |
| EBITDA (in $ millions) | 9.0 | 30.0 |
| Segment peer ratio | EV/EBITDA | EV/Sales |
| Peer median valuation multiple | 10.8x | 2.5x |
If the conglomerate's market value of equity is $130 million and its net debt is $10 million, the conglomerate discount (in $ millions) is closest to:
A. 32.2
B. 77.2
C. 97.2
A
32.2
B
77.2
C
97.2