1) Hagar Enterprises (HA) has a fresh technology for recording heavy metal bands in studio. Firm is confidentially held and there is no public market for its common stock. Hagar’s 2012 EBIT was= $1.5 million. Firm’s year-end 2012 accumulated-depreciation balance was= $1.2 million; at the ending of 2011, accumulated depreciation-balance was $700,000. At the end of 2012, Hagar had total liabilities of= $2.7 million that included a $2 million loan balance, and firm’s total shareholders’ equity balance was= $3.3 million. CEO has asked you to find out value of Hagar Enterprises’ equity. You have found a public company which gives similar digital technology solutions to recording industry, named SoundBytes Corporation (SI). SoundBytes’ share price is= $75 and firm has= 400,000 shares outstanding. SI also has $10 million in bonds outstanding, and its present EBITDA is= $16 million. Be sure to give all computations in your answers to each of following questions:

Questions:

i) Compute Soundbytes’ enterprise value and its EBITDA multiple.

ii) Compute Hagar Enterprise’s EBITDA.

iii) After completing (i) and (ii) above, utilize SI’s EBITDA multiple to find out Hagar Enterprise’s implied Enterprise Value and its estimated equity value.