Business Valuation
Enterprise and equity value
Do two businesses with the same share value cost the same to acquire?
Enterprise value approximates the value of operating assets. Equity value belongs to shareholders.
Enterprise value = equity value + debt − excess cash
Begin with what shareholders receive. Add debt and subtract cash available above operating needs. $60m + $18m − $8m = $70m.
At $60m equity, $18m debt and $8m cash, EV is $70m.
Begin with what shareholders receive. Add debt and subtract cash available above operating needs. $60m + $18m − $8m = $70m.
A target has $60m equity, $18m debt and $25m excess cash. What is its simplified EV?