GMAT Practice Question Set #6 (Question 16-18)

GMAT Integrated Reasoning  >  Graphics Interpretation Question # 17: Enterprise Value & Multiples  
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gmat integrated reasoning - graphics interpretation

The graph here is a scatter plot of 7 points, each representing a company's return on capital and EV/Capital ratio in the fictitious Widgets industry.

Return on Capital is defined as EBIT (Earnings Before Interest and Taxes) divided by Capital (or EBIT/Capital).

The slope provided is y-axis over x-axis; here the slope is (EV/capital) / (EBIT/captial) = EV/EBIT. An EV/EBIT slope of 8.0x is drawn as a dotted line.

Use the drop-down menus to fill in the blanks in each of the following statements based on the information given by the graph.

 

A) Among the companies listed, if a company had a ROC % no more than 40%, it had EV/Capital ratios of no more than .

B) Referencing the 8.0x EV/EBIT slope, the appropriate EV/EBIT multiple for the Widgets industry is most closest to .

 

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