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I would like to know if you can help me in a valuation that I am currently working on.

Problem framework:

-I am valuating company A, which will acquire 100% company B with a 8x ebitda multiple (10M);

-Company B has 2M of net working capital.

Question:

-What is the impact in free cash flow of company A? Capex of -10M in company A? Should the 2M of net working capital impact working capital variation in company A?

-What is the impact in capital employed of company A? +10M in gross assets in company A (assuming there is no goodwill)? Or 8M in gross assets and 2M in net working capital?

Thanks in advance.

I would be very grateful if you provide some help to this question.

Best, Ruben

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  • $\begingroup$ Hi Ruben, welcome to Economics. I'd suggest you to take the tour. This reads a bit like a homework assignment. In that case, we could help you but only provided that you tell us how far you are. What have you attempted so far? If it isn't the case, please consider adding some clarification. $\endgroup$ – bilbo_pingouin Aug 22 at 8:46

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