Series 79 practice questionmediumEnterprise Value vs Equity Value
A company has a share price of $40, 100 million diluted shares outstanding, $800 million in total debt, $200 million in cash, and $50 million in minority interest. What is the company's enterprise value?
- A$4,000 million
- B$4,850 million
- C$4,650 million✓ Correct answer
- D$3,850 million
Explanation
Why C — $4,650 million
Enterprise value = Equity value + Total debt + Minority interest - Cash. Equity value = $40 x 100M shares = $4,000M. EV = $4,000M + $800M + $50M - $200M = $4,650M. Minority interest is added because the company's financial statements consolidate 100% of the subsidiary's revenue and EBITDA, so to be consistent, the minority claim on that subsidiary must be included in enterprise value.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 995+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Collection, Analysis & Evaluation of Data questions
- Why is cash subtracted when calculating enterprise value from equity value?
- Which of the following is the correct formula for enterprise value?
- An investment banker is calculating diluted shares outstanding for the equity value bridge. The company has 50 million…
- Precedent transaction analysis is also commonly known as:
- Which of the following is an equity value multiple rather than an enterprise value multiple?
- A precedent transaction analysis for a technology target reveals the following transaction EV/Revenue multiples: 3.2x,…
- An investment banker calculates a target's enterprise value at $2 billion using a DCF analysis. The company has $400…
- In a precedent transaction analysis, which financial metric is most commonly used as the basis for the transaction…