which is used? why? im assuming book value of debt.
if a company buys another wont it really just pay for the equity + some premium and assume the debt without paying for it?>
enterprise value is just a theoretical value used for ratios/comps right?
| +166 | The "Not So Obvious" things that get you a return offer? | 20 | 47m | |
| +102 | Is my life over after not getting GS? | 23 | 2s | |
| +65 | Best IB group on the Street | 27 | 2h | |
| +56 | BIG FOUR ARE PARADISE | 15 | 1h | |
| +46 | Thoughts and tips on how to speak like an investment banker. | 25 | 2h | |
| +45 | Tell me one good reason why Jefferies isn’t going to be a top bank in the next 5 years | 22 | 6h | |
| +36 | UBS Outlook | 28 | 1d | |
| +35 | Georgetown Placement for 2024 and 2025 | 21 | 6d | |
| +34 | How to deal with egotistical team? | 6 | 3d | |
| +32 | Highest Paid Bankers in Toronto? | 51 | 12m |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Use market value of debt, if you can.
EV is generally used for ratio/comps, but theoretically it should give you the valuation of the firm (payouts of the firm to both debt and equity holders)
most of time book and market value of debt will be equal unless the company is going through some restructuring for example.
Yea, ib_analysts, your statement is not correct. GM bonds for example are trading nowhere near their book value right now I don't believe. Someone correct me if I am wrong.
NEVER lose your BlackBerry www.conveniencesoftware.com
MV of Debt is almost NEVER the same as BV. Most debt for corporations are based on a libor spread. If a company enters into an interest rate swap at a fixed rate for all of its debt (assuming this is possible without breaking covenants) then you could make a case for MV=BV, well it still wouldnt be equal but it may be close.
while market value of debt is probably theoretically better in all cases, in practice, book value is generally used unless the company is distressed, so ib_analysts is indeed correct. in distressed situations (of which there are of course unusually many today, as pointed out above) make sure to use market value. people tend to consider a company distressed when the debt trades below somewhere around 70 cents on the dollar. in those distressed situations, when calculating EV, you will also typically assume no value to the equity (even though the stock price is not 0). moneykingdom - corporate bonds have fixed coupons, not libor spreads.
Quo dolorem quisquam quaerat culpa iusto voluptatem. Placeat et voluptatibus libero ut quidem deleniti quod error. Enim dolor id ex nobis quasi occaecati ipsum. Voluptas ullam non iure praesentium.
Est aperiam debitis quos voluptatem quos numquam quae. Placeat sit velit enim. Sequi vel praesentium tempora labore eveniet perferendis itaque. Soluta itaque rerum velit et ratione. Culpa quia tempora assumenda occaecati et ab velit sed.
Voluptatem nostrum et sed autem vero. Alias non consequatur dolor rerum est aut quod molestiae.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...