"Advanced" Valuations/Corporate Finance Questions (HELP)
My concern here is about the different versions of the Enterprise Value (EV) and Equity Value.
Equity Value
There are two types of equity values that are frequently used in a valuation: Market Captalization (Relative Valuation) and Book Value (Intrinsic Valuation).
Regarding Book Value, there are two different forms to calculate it: FCFE in DCF and Total Assets - Total Liabilities.
Enterprise Value
EV = Equity Value + Net Debt
1) (Relative Valuation) EV = Market Cap + Net Debt. In other words, the current EV in the market.
2) (Instrinsic Valuation) EV = Book Value (DCF method) + Net Debt. In other words, the fair EV.
3) (Instrinsic Valuation) EV = Book Value (Balance Sheet method, Total Assets - Total Liabilities) + Net Debt. In other words, the fair EV.
There are, still, two ways to calculate the terminal value: Gordon (Instrinsic Valuation) and Multiples (Relative Valuation). So the variations of EV becomes:
1) EV = Market Cap + Net Debt. This is a pure relative valuation method.
2) EV = Book Value (DCF method, Gordon's Terminal Value) + Net Debt. This is a pure intrinsic valuation method.
3) EV = Book Value (DCF method, Multiples' Terminal Value) + Net Debt. This method mixes the relative (DCF) and the intrinsic valuation (Multiples).
4) EV = Book Value (Total Assets - Total Liabilities) + Net Debt. This is a pure intrinsic valuation method.
Opinions from you:
This is my understanding about the Enterprise Value and the Equity Value. It seems really confusing to me because each website/videos/books explains EV and Equity Value differently. Please give me some opinions on what I'm getting wrong from this theory. Thanks.
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