The enterprise-value-to-ebitda ratio is higher for firm e


The enterprise-value-to-EBITDA ratio is higher for Firm E than for Firm F. If both firms are in the same industry, which of the following explanations is (are) plausible?

a. The expected growth rate in free cash flows is higher for Firm E than for Firm F.
b. The risk of future free cash flows is lower for Firm E than for Firm F.
c. Firm E is overvalued, or Firm F is undervalued, or both.
d. All of the above
e. A and C

 

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Finance Basics: The enterprise-value-to-ebitda ratio is higher for firm e
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