Enterprise Value, according to McKinsey

I noticed that in the McKinsey valuation book, enterprise value is defined as the present value of operations + the present value of non-operating assets.

That is a different definition from the one I learned in class, EV = Equity + Debt + MI - Excess Cash. I realize that they have the same conceptual meaning, preferring one over the other is really just a matter of whether you want to include the value of non-operating assets as a part of enterprise value.

Which one is more common in practice?

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3 Comments

Bullet-Tooth Tony

IB

13y

In IB? The latter.

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Authored by: Certified Investment Banking Professional - Executive DirectorCertified Investment Banking Pro

mdk6c

CO

13y

Thanks

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cruel3a

PE

13y

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Enterprise Value, according to McKinsey

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Enterprise Value, according to McKinsey

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