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Series 79 practice questionmediumPrecedent Transaction Analysis

A precedent transaction analysis for a technology target reveals the following transaction EV/Revenue multiples: 3.2x, 4.1x, 3.8x, and 5.5x. The target has LTM revenue of $200 million. Using the median multiple, what is the implied enterprise value?

  1. A$640 million
  2. B$1,100 million
  3. C$760 million
  4. D$790 million✓ Correct answer
Explanation

Why D — $790 million

The four multiples sorted are 3.2x, 3.8x, 4.1x, and 5.5x. The median of four values is the average of the two middle values: (3.8x + 4.1x) / 2 = 3.95x. Applying this to LTM revenue of $200M gives an implied enterprise value of $200M x 3.95x = $790M. Using the median reduces the impact of the 5.5x outlier, which may reflect unique strategic value in that particular transaction.

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