What is the enterprise value (EV) implied by a comps-based TEV calculation when a company has $100 million EBITDA, comps trade at 10x, next year requires $80 million in additional working capital and incurs $20 million in cash litigation expense?

• A. $1,200 million
• B. $1,100 million
• C. $1,300 million
• D. $1,000 million

Answer: (B)

When valuing with comps, you start with the operating performance and apply the trading multiple to get the baseline enterprise value for the business, then adjust for near-term cash needs the buyer would have to fund.

Here, EBITDA is 100 million and the comps trade at 10x, so the baseline enterprise value is 1,000 million. Next year, the business will require 80 million of additional working capital and will incur 20 million in cash litigation expense. A buyer paying to acquire the company would need to provide that cash at closing, effectively increasing the price. Add these cash needs to the baseline EV: 1,000 + 80 + 20 = 1,100 million.

So the implied enterprise value is 1,100 million.