Assume that the following two companies are in the same industry, have the same EBITDA and similar growth profile. The main difference is the capital…

Assume that the following two companies are in the same industry, have the same EBITDA and similar growth profile. The main difference is the capital expenditure as shown below. Based on the EV/EBIT multiple, I am confused that whether company B is more likely to trade at a premium? 

Company A: Large capital expenditure to buy new equipment/machinery in recent years, resulting in increased depreciation for the current and future years 

Company B: Deferred in capital spending until a future period, resulting in small amount of depreciation /amortisation 

Get 20% discount on this paper. Use coupon: GET20

Posted in Uncategorized