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Enterprise Value/EBITDACompany EV EBITDA EV/EBITDA ComputedPrice<strong>SWM</strong> 1,204.554 13.50 -22.05<strong>SWM</strong> Restated 1,204.554 20.10 -19.70Alliance One 1,435.737 239.17 6.15Universal 1,741.495 283.17 6.00Average 6.075<strong>Mark</strong>et Cap and EBITDA in millionsThe industry average equals 6.075. To compute Schweitzer-Mauduit’s comparable pricewe multiple EBITDA by the industry average and then subtract out book value of debt and addback cash and investments. We then divide by number of shares outstanding to get a price of$-22.05. The computed price is negative because book value of debt exceeds cash andinvestments by $ 424 million. However, stock prices cannot be negative so this price is notapplicable. The computed restated price was $-19.70 and once again stock prices cannot benegative so the restated stock price is not applicable as well.Price to Free Cash Flow (P/FCF)The price to free cash flow ratio compares the firm’s market price to its amount of freecash flow, which is cash flows from operations minus capital expenditures. This ratio is ameasure of how well a company’s free cash flows can support its equity value. It is calculatedby multiplying price per share by shares outstanding and dividing by free cash flow. Free cashflow is computed by CFFO + CFFI +/- the change in CFFF. After computing the firm’s free cashflows find the industry average. Once you have the industry average, multiply by your firm’smarket cap and then divide that number by total number of shares outstanding.164
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