**Question 990** Multiples valuation, EV to EBITDA ratio, no explanation

A firm has 2 million shares, expected EBITDA at the end of this year of $200 million per annum, $100 million in cash (not included in EV) and its market debt-to-assets ratio is 1/3. (market assets = EV + cash). Next year’s expected dividend yield is 4% pa, the expected dividend growth rate is 2% pa, next year’s expected payout ratio is 40% and the corporate tax rate is 30%. Dividends are paid annually.

Similar firms have an EV/EBITDA ratio of 10.

The stock can be valued using the EV/EBITDA multiple, dividend discount model, Gordon growth model or PE multiple.

Which of the below statements is **NOT** correct based on an EV/EBITDA multiple valuation?