If You Were Buying A Vending Machine Business, Would You Pay A Higher

1.	If You Were Buying A Vending Machine Business, Would You Pay A Higher Multiple For A Business Where You Owned The Machines And They Depreciated Normally, Or One In Which You Leased The Machines? The Cost Of Depreciation And Lease Are The Same Dollar Amounts And Everything Else Is Held Constant.
Answer» You would pay more for the one where you lease the machines. Enterprise VALUE would be the same for both COMPANIES, but with the depreciated SITUATION the CHARGE is not reflected in EBITDA - so EBITDA is HIGHER, and the EV / EBITDA multiple is lower as a result. For the leased situation, the lease would show up in SG&A so it would be reflected in EBITDA, making EBITDA lower and the EV / EBITDA multiple higher. You would pay more for the one where you lease the machines. Enterprise Value would be the same for both companies, but with the depreciated situation the charge is not reflected in EBITDA - so EBITDA is higher, and the EV / EBITDA multiple is lower as a result. For the leased situation, the lease would show up in SG&A so it would be reflected in EBITDA, making EBITDA lower and the EV / EBITDA multiple higher.

If You Were Buying A Vending Machine Business, Would You Pay A Higher Multiple For A Business Where You Owned The Machines And They Depreciated Normally, Or One In Which You Leased The Machines? The Cost Of Depreciation And Lease Are The Same Dollar Amounts And Everything Else Is Held Constant.

Answer»

You would pay more for the one where you lease the machines. Enterprise VALUE would be the same for both COMPANIES, but with the depreciated SITUATION the CHARGE is not reflected in EBITDA - so EBITDA is HIGHER, and the EV / EBITDA multiple is lower as a result. For the leased situation, the lease would show up in SG&A so it would be reflected in EBITDA, making EBITDA lower and the EV / EBITDA multiple higher.

You would pay more for the one where you lease the machines. Enterprise Value would be the same for both companies, but with the depreciated situation the charge is not reflected in EBITDA - so EBITDA is higher, and the EV / EBITDA multiple is lower as a result. For the leased situation, the lease would show up in SG&A so it would be reflected in EBITDA, making EBITDA lower and the EV / EBITDA multiple higher.

If You Were Buying A Vending Machine Business, Would You Pay A Higher Multiple For A Business Where You Owned The Machines And They Depreciated Normally, Or One In Which You Leased The Machines? The Cost Of Depreciation And Lease Are The Same Dollar Amounts And Everything Else Is Held Constant.

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