Given the 5x multiple, what would be the offer price if the average projected operating profit for the next three years is $8 million?

Given the 5x multiple, what would be the offer price if the average projected operating profit for the next three years is $8 million?

• A. $24 million
• B. $40 million
• C. $56 million
• D. $8 million

Answer: (B)

Applying a multiple to a projected profit means you multiply the given profit figure by the specified multiple to estimate the offer price. Here, the multiple is five, and the average projected operating profit for the next three years is $8 million. So, 5 × 8 million = $40 million. The offer price would be $40 million. The other options reflect different multiples (lower or higher), but since the problem uses a 5x multiple, $40 million is the correct result.

Applying a multiple to a projected profit means you multiply the given profit figure by the specified multiple to estimate the offer price. Here, the multiple is five, and the average projected operating profit for the next three years is $8 million. So, 5 × 8 million = $40 million. The offer price would be $40 million. The other options reflect different multiples (lower or higher), but since the problem uses a 5x multiple, $40 million is the correct result.