Enterprise & Equity Value
Why do you ADD debt and SUBTRACT cash when going from equity value to enterprise value?
Model answer
Enterprise value represents the value of the core operating business, which is what all capital providers collectively own. You ADD debt because debtholders have a claim on the business that an…
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More from Enterprise & Equity Value
- What's the difference between enterprise value and equity value?
- Why do you subtract cash when going from equity value to enterprise value?
- Why is enterprise value capital-structure neutral but equity value is not?
- A company issues $100 of new debt and holds the cash on its balance sheet. What happens to EV and equity value?
- Which valuation multiples pair with enterprise value vs. equity value, and why?
- How do you calculate fully diluted shares?
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