Explanation:
To calculate the conglomerate discount, we need to:
Calculate the sum-of-the-parts (SOTP) value
$97.2 million$120.0 million$217.2 millionCalculate the actual enterprise value
$130 million$10 million$140 millionCalculate conglomerate discount
$77.2 millionHowever, the question asks for the conglomerate discount in 77.2` million corresponds to option B. But let me verify the calculation:
Wait, I need to recheck the calculation:
Actually, the conglomerate discount is the difference between the sum-of-the-parts value and the actual market value:
$217.2 million$130 million (equity) + $10 million (net debt) = $140 million$217.2 - $140 = $77.2 millionThis matches option B ($77.2), not option A ($32.2). Let me double-check the peer multiples:
Segment Y: 9.0 × 10.8 = $97.2 million ✓
Segment Z: 48.0 × 2.5 = $120.0 million ✓
Total SOTP = $217.2 million ✓
Actual EV = $140 million ✓
Discount = $77.2 million ✓
Therefore, the correct answer should be B. 77.2.
Ultimate access to all questions.
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
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