Harman Electrical Engineering Has Developed A Ground Breakth

Question

Harman Electrical Engineering Hee Has Developed A Ground Breaking Ne Harman Electrical Engineering (HEE) has developed a ground-breaking new robotics technology already used in major civil engineering construction projects across the country. The firm is privately held, and there is no public market for its common stock. HEE’s 2012 EBIT was $3.9 million. The firm’s end-of-2012 accumulated depreciation balance was $1.1 million, increased from $800,000 at the end of 2011. At the end of 2012, HEE had total liabilities of $4.4 million, including a $2.6 million loan, and total shareholders’ equity of $1.6 million. The CEO has asked for an estimation of HEE’s equity value, based on industry valuation multiples. This analysis involves several steps. First, we need to determine the enterprise value of a comparable public company, BridgeTech, which develops robotics software for manufacturing. BridgeTech’s share price is $120, with 500,000 shares outstanding, and it has $15 million in bonds outstanding. Its EBITDA is $18.75 million. Using this information, we will calculate BridgeTech’s enterprise value and EBITDA multiple. Next, we will estimate HEE’s EBITDA based on available financial data. Finally, we will apply BridgeTech’s EBITDA multiple to HEE’s EBITDA to estimate HEE’s implied enterprise value and equity value.

Dr. Jack HW Helper · Accepted Answer

Introduction Valuing a privately held company such as Harman Electrical Engineering (HEE) necessitates using comparable public firms and their valuation multiples. Since HEE is private, direct market valuation is infeasible, and reliance on industry multiples derived from similar public entities is essential. BridgeTech, a public company specializing in robotics software for manufacturing, provides a suitable benchmark due to its industry context and operational focus. Part A: Calculating BridgeTech’s Enterprise Value and EBITDA Multiple To determine BridgeTech’s enterprise value (EV), we sum its market equity value and its debt. The market capitalization is calculated by multiplying the share price by the number of shares outstanding: $$ \text{Market Capitalization} = \$120 \times 500,000 = \$60,000,000 $$ Adding BridgeTech’s outstanding bonds gives its total enterprise value: $$ \text{Enterprise Value} = \$60,000,000 + \$15,000,000 = \$75,000,000 $$ Next, we calculate the EBITDA multiple: $$ \text{EBITDA Multiple} = \frac{\text{Enterprise Value}}{\text{EBITDA}} = \frac{\$75,000,000}{\$18,750,000} = 4.0 $$ This multiple reflects how the market values the firm in relation to its EBITDA, providing a basis for valuation of other firms in similar industries. Part B: Calculating HEE’s EBITDA Given HEE’s EBIT of $3.9 million and accumulated depreciation figures, we calculate its EBITDA by adding back depreciation and amortization expenses. Though the precise depreciation expense for 2012 is not specified, we can approximate it from changes in accumulated depreciation: $$ \text{Depreciation Expense} \approx \text{Change in Accumulated Depreciation} = \$1,100,000 - \$800,000 = \$300,000 $$ Assuming no significant amortization, HEE’s EBITDA is: $$ \text{EBITDA} = \text{EBIT} + \text{Depreciation} = \$3,900,000 + \$300,000 = \$4,200,000 $$ This figure provides an earnings baseline adjusted for non-cash depreciation charges, suitable for applying valuation multiples. Part C:

Harman Electrical Engineering Has Developed A Ground Breakth

Harman Electrical Engineering Hee Has Developed A Ground Breaking Ne

Paper For Above instruction

Introduction

Part A: Calculating BridgeTech’s Enterprise Value and EBITDA Multiple

Part B: Calculating HEE’s EBITDA

Part C: Estimating HEE’s Enterprise and Equity Values

Conclusion

References