Series 79 practice questionmediumEnterprise Value vs Equity Value
How does the existence of preferred stock affect enterprise value calculations?
- ANo impact on enterprise value
- BSubtract from equity value only
- CExclude from all calculations
- DAdd to equity value when calculating enterprise value✓ Correct answer
Explanation
Why D — Add to equity value when calculating enterprise value
Preferred stock is added to equity value in enterprise value calculations because it represents a non-common equity claim. Omitting this would understate enterprise value.
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