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Interview question about enterprise value
Hi all, just finished an interview and was stumped by the following question. "I have two buildings, building A and building B. Both have the same cash flows, same risk profile and are in the same country. However, building A begins operations on January 2024 while building B begins operations on...
IB Interview question on EV
Hi, this is probably super easy but I was asked what is worth more, a company 100% financed by equity or one financed with debt. I assumed that as debt costs less than equity then that yields to a lower wacc and a higher EV value. I know that Ke is affected by debt but I would assume it is always...
Do dividends affect the EqV and EV?
Do dividends affect the EqV and EV? My assumption: EqV changes but EV remains the same. Do you agree or am I getting this wrong?
Do expenses (e.g. pension expenses) have an effect on the enterprise value?
Going through the 3 statements, I assume that expenses (e.g. pension expenses) have no effect on the PA. Example: Expense of 100 (tax 30%) -> reduce net income by 70 -> CF is also reduced by 70. That means the equity decreases by 70 and the cash balance on the assets side decreases by 70. In...
Unlevered Free Cash Flows
Huge apologies if this is a repeat question, but is it often that a company with enterprise value exceeding the sum of its projected unlevered free cash flows is still a good buy? Is the sum of ufcf's an irrelevant quantity to private equity analysts?
Impact of preferred dividends on equity value and EV
The way I understand it, there are really two reliable ways for assessing the impact of some transaction on enterprise value. 1 is to feed it through the standard (equity value - cash + debt + preferred stock + minority interest) formula, and the other is to determine the change in net operating...
No debt, highly positive cash balance. Equity Value > Enterprise Value?
As can be seen in Year 19 for example. If a company has zero debt, but big cash balances ($7,105 in this case), would equity value be larger than enterprise value? How can I make sense of this logically? Would it be that if the company were to sell on a multiple, the retained earnings (the source of...
Understanding Enterprise Value, Help??
Hey, I have an interview and I really can't understand why we add debt to equity value on the enterprise value. Doesn't the equity value already automatically discount the debt and thus only the real amount to be paid is left? I read that the buyer always was to pay for the debt but I just can't...
Understanding Enterprise Value, Help???
Hey, I have an interview and I really can't understand why we add debt to equity value on the enterprise value. Doesn't the equity value already automatically discount the debt and thus only the real amount to be paid is left? I read that the buyer always was to pay for the debt but I just can't...
Capital leases when calculating for Enterprise Value and Equity Value
Guys, help! I've moved from VC to PE as an analyst - essentially, from valuating small startups w/o debt, NWC, capex to DCF valuation of large capex, debt, NWC comps. Currently, on PE side I'm doing DCF for a university-startup which will start operating from next year. It has just signed $25mln...
Introduction
Value, Growth, Momentum research utilizing algorithms to uncover GAAP discrepancies. Favorite book: Securities Analysis, Benjamin Graham "“Many shall be restored that now are fallen and many shall fall that now are in honor.”
Enterprise Value with tax liabilities
Hi quick question, thanks so much for your time. If a company has a huge long term tax liability. Am I counting this as part of debt for Enterprise Value?
Excess Cash, Total Cash, and Enterprise Value - Interview question
Hey Everybody, I apologize if this is in the wrong forum, but doing interview prep and ran across this question for calculating EV that I don't get. Super lost, and sorry if this is a stupid question...I got a lot to learn. I am given the share count ($10), # of shares (200M), net debt (300m), total...
Enterprise value question - A bit confused
I'm currently studying for CFA level III and going through some valuation concepts for upcoming interviews, and I'm a bit confused with some of the notions surrounding enterprise value. In Breaking Into Wall Street's IB interview guide, it says the following: "If you say that Debt “adds to”...
What’s an equity investor?
So when we talk about equity vs enterprise value, we say equity value pertains to what’s only available to EQUITY investors within a firm. I know this but how can I think about this conceptual? Also when we compare enterprise value to equity value in terms of what changes are made, we say...
Enterprise value calculation for a bank
To calculate enterprise value, I need to add debt and subtract cash from equity. The company issues notes and repos. Are those considered debt for the sake of this calculation? The company (it is a bank) temporarily owns short-term loans before selling those to third-party investors. Are those...
Valuation When Acquire
So how do you get valuation when you acquire less than 50% of the company's equity and no change in ownership happens? I mean, you can certainly value the 100% company and multiply the EV /Equity Value by % you wanna acquire. But do you need to get Enterprise Value when you only buy a minority...
EV Questions
What happens when a company issues a $100mm stock repurchase? Assuming equity value decreases by taking shares outstanding out of the equation , which is offset by decrease in cash (assuming we use cash to repurchase shares) so EV remains neutral. Just wanted to see if/how my logic was flawed here....
Question on Retained Earnings and Enterprise Value?
Hi! I hope this is the right forum for my question, Im new to WSO :) In short, I struggle with two things: 1. Retained Earnings To my understanding represents the total sum of all [Net Income - Dividends] paid over all FYs of a companys lifetime. Now, when I consider huge, profitable companies that...
Impact of Dividends on Equity Value and Enterprise Value
Hi everyone, Quick question on something that has been confusing me from some of the interview guides. When a company issues dividends, many of the guides say that this does not impact enterprise value. Given the formula for enterprise value, I am having a hard time seeing how that is the case. If a...
Enterprise value number to use for ratios on income statement items
When doing something like EV /SALES or EV / EBITDA should you use an EV based on a weighted average shares market value since that captures share changes over time (like IS items) or is it OK to go ahead and use an EV based on the latest fully diluted market value?
Silly question relating to company valuation
Hi guys, I'm clearly missing out on something as I'm a bit confused about something. Sorry, this might sound silly: To value public companies (find the enterprise value), why can't you just find the equity value (by current share price x fully diluted outstanding shares), and then just add debt,...
Enterprise Value
If company raises debt, the cash increase offsets the increase in debt, therefore the Enterprise Value will stay the same. But how come the Equity Value stays the same? What about the higher interest expenses and principal repayments associated with more debt?
Enterprise Value Interview Questions for Banking
Hi guys, I've recently had a series of EV questions thrown at me during one interview and wanted your opinion whether I've answered them correctly... They all had to do with what happens to enterprise value when you issue new equity or debt. The questions were: If the current EV of a company is...
Deferred Tax Assets in Calculation of Enterprise Value and Earnings Yield
Background: For Joel Greenblatt's "Magic Formula," he defines earnings yield as EBIT/ EV . Further, he defines EV as equity value including preferred equity + net interest bearing debt. I'm looking at a potential investment in Socket Mobile (SCKT). In 2015, Sckt had EBIT of $2.1M on an EV of $3.7M...
EV of a Private company
How do you find the enterprise value of a private company? I have the financials, is it just paid in capital + net debt? Or would it be the assets (market value) + net debt. Thank you!
Is enterprise value the same as value of operating asset?
Hi, It would be nice if someone can clarify my understanding. (1) I would like to check if my understanding of enterprise value is correct, refer to the image above Next is with regards to consolidated statements (Example company A&B consolidated statements) When we use NI (adjusted to remove gains...
Tax shield value
Hi, Unlevered firm value (FVu) is generally agreed to be equal to levered firm value (FVl) - tax shield value (VTS). So FVl is greater than FVu, thanks to tax benefits. Ultimately, this greater value (VTS) benefits to shareholders (as debtholders revenue is generally fixed, idem for preferred stock...
IB Interview quesion: What is debt trading at..?
Hi guys, I recently ran into these EV questions when preparing for interviews. I am not sure about the answers and I would really appreciate if someone could explain a bit. (1) If the current EV of a company is $150mm ( equity value =$150mm, book value of debt=$200mm), what is debt currently trading...
Comparable Company Analysis
How's it going, I was assigned to do a comparable company analysis for homework. However, I'm not sure if I did it correctly. The instructions were very vague so I had to do research and do the best(?) I can. This is the first time I attempt doing this, so I am looking for your opinions,...
How Tax Rate affects Enterprise Value (EV)
Hi all, I have some questions on an undying topic that's continuously discussed on the street: how tax rate affects EV valuation of companies. Some people argue it's positively correlated to EV while others argue it's the opposite. Based on my experience/observation, I think it's positively...
Calculating IRR of cash flows with terminal value
I have a project with an initial outlay (Year 0) and 10 years of forecasted positive FCFFs and FCFEs. After 10 years, I use a Gordon/Perpetuity Growth Model to determine Terminal Value. I built DCF model and discounted FCFFs with WACC (to arrive at Enterprise Value) and FCFEs with Cost of Equity (to...
What happens to cash when you buy a company?
Hey guys, Would really appreciate some help with a probably really basic accounting question. When you purchase a company, let's say through an LBO .... what happens to the cash of the target? Does the seller take it all with them? So, once you own the company, there's 0 cash left? The reason I...
Valuation of consolidated company
Can someone please help me on how to value the equity of consolidated company (Parent) who has two investments in associate (Ownership ratio: 25% and 40%, respectively) whose business is core of the parent. these associate companies are accounted under equity method so equity pick-up is recorded in...
WDC - SNDK Merger
Hi all, I'm trying to reconcile and make sense of the announced deal consideration structure for SNDK. From reading the SEC filings, the deal consideration is $18.9 bn. However in the presentation Western Digital's Acquisition of SanDisk, dated 21 October 2015, the sources of financing are listed as...
Why can you use Equity Value / Revenue but not Equity Value / EBITDA?
I understand that you don't really use equity value / EBITDA because you're comparing apples to oranges (Eq. val. is available to only shareholders while ebitda is available to all investors). But if that's the case, then why is it that you might (but rarely of course) use equity val / revenue? I...
Question about Understanding Per Share Present Value Given Current Fundamentals of a Stock
Hey fellow monkeys, I was wondering if the per share value of a stock given its current fundamentals is reliable in terms of understanding whether it is undervalued or overvalued. For example, if I calculate the equity value divided by the shares outstanding of a company's stock using its current...
PE entry multiples - pre or post on enterprise value
why is the post money EV / EBITDA multiple preferred over the pre money mulitple.
Control Premiums and Minority Discounts Using Multiples
Hi there, I'm currently writing a paper about how to apply control premiums and minority discounts in terms of multiple valuation. My focus is to valuate a private company with publicly traded comparable companies. So during my research I came across some questions: Given the following value basis:...
post money enterprise value
why is the post money EV / EBITDA multiple preferred over the pre money mulitple
Tricky Enterprise Value Question
I got asked about when a company would have a negative enterprise value in my superday . I answered when its cash balance is greater than its combined debt and equity (he told me to ignore the other stuff). I mentioned that banks sometimes have a negative EV b/c of their large cash balances. He was...
Notes for Technical Interview Questions
During a recent round of interviews with several banks, headhunters sent across a number of potential technical questions that they said I should be very comfortable with. However, through all of my interviews I was never actually asked any technical questions (although I did do a 3 hour modelling...
A Tangled Web of Values: Enterprise value, Firm Value and Market Cap
Enterprise value in distress
Im having trouble working my way through assessing the enterprise value in the situation I describe below, and I was hoping for some advice:
The true purpose of calculating Enterprise Value
Hi guys, Some sources call EV the "price that an acquirer really pays''. But in reality the purchase price is always the stock price plus certain premium. Does it mean that EV is just a 'theoretical price' for the business? If so why do we go through all the trouble gauging a company's EV ,...
Interest Bearing Debt
Why is only interest bearing debt included in EV ? I understand that sometimes you include pension liabilities, capital leases, etc., but why aren't all liabilities included? Wouldn't these need to be paid off by an acquirer?
"Is a higher multiple good or bad?"
How would you guys answer this question with respect to EV /EBIT EV / EBITDA I don't think its a straight forward good or bad answer, I think it depends on things such as relative comparison to other companies in the industry...is a higher enterprise value good in general though? Again it'd depend...
Equity value / Cash / Enterprise value
Hey everyone, Quick question cause I am confused. If a company has 100 shares in the market with price of 1 dollar (or marketcap of 100 dollars) and cash of 50 dollars, and debt of 10 dollars. The EV is 100+40 = 140 1) Why is it that having cash actually reduces the EV than having debt? 2) When a...
EV: Unconsolidated Assets
Curious to hear people's thoughts on how you handle unconsolidated assets/entities (
Creation value concept in distressed valuation
Is anyone familiar with the "creation value" concept in distressed valuation? Ie. if the current capital structure is 500 senior secured term loan, and 500 of unsecured subordinated notes. Say you purchase the notes for $0.50 on the dollar. Often it is referred to as creating the enterprise value at...
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