Series 79 practice questionmediumDCF Analysis
Which approach is most appropriate for reconciling enterprise value to implied equity value per share in a DCF?
- ASubtracting SG&A expenses
- BAdding net working capital
- CAdding non-operating assets
- DSubtracting net debt and dividing by fully diluted shares✓ Correct answer
Explanation
Why D — Subtracting net debt and dividing by fully diluted shares
Subtracting net debt and dividing by the diluted share count produces the implied equity value per share. Omitting net debt or share dilution can significantly misstate the implied share price.
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