Business Valuation

1) What are the main pitfalls of a "multiple of book value" as a means of valuing a company?

Answer in this text box. No WORD, PDF or EXCEL attachment.(1page)

2) What could make the ratio called (current) Enterprise Value/EBITDA lower than the current P/E ratio?(1page)

3) Referring to the paragraphs from one of my consulting assignments that follow here, explain what I did, and why I did it. (1/2 page)

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I also note xxxx's salary figure, as it is specified under “Compensation of officers” in the tax returns. Because the true net income of the firm must be revealed, in order to estimate the value of XXX, I investigated what an arms-length salary would likely have been, for a new CEO hired by a new (potential) owner. For this estimation, I utilized a unique and highly-regarded salary source, ERI Economic Research Institute’s “Executive Compensation Assessor.” For a CEO of a $5,000,000 firm in Washington, DC, in Computer Software services or Computer Programming, the total compensation estimate is $296,184. I subtracted that figure from the xxxx salary, and added it to observed 2011 net income under the row title “Implicit extra taxable income.” In the next line (ADDENDUM,”Financials”), I estimated and subtracted a 20% marginal tax rate on the “new” net income, arriving at “Implicit net income, after salary and tax adjustment.”