You are valuing multiple steady-state companies in the same industry. Company Ais projected to earn $160 million in EBITA next year, grow at 2 percent per year, and generate ROICs equal to 15 percent. Company B is projected to earn $160 million in EBITA next year, grow at 6 percent per year, and generate ROICs equal to 10 percent.
Both companies have an operating tax rate of 25 percent and a cost of capital of 10 percent. What are the enterprisevalue-to-EBITA multiples for both companies? Does higher growth lead to a higher multiple in this case?