Which of the following is NOT an advantage of the valuation multiple method as compared to the discounted cash flow method?
Use the table for the question(s) below.
Name Market Enterprise Enterprise Enterprise
Capitalization Value Price/ Value/ Value/
($ million) ($ million) P/E Book Sales EBITDA
Gannet 6350 10,163 7.36 0.73 1.4 5.04
New York Times 2423 3472 18.09 2.64 1.10 7.21
McClatchy 675 3061 9.76 1.68 1.40 5.64
Media General 326 1192 14.89 0.39 1.31 7.65
Lee Enterprises 267 1724 6.55 0.82 1.57 6.65
Average 11.33 1.25 1.35 6.44
Maximum +60% 112% +16% +22%
Minimum -40% -69% -18% -19%
A) calculations based upon widely available information
B) based upon actual stock prices of real firms
C) does not rely on estimates of future cash flows
D) takes into account important differences between different firms
Answer: D
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