Enterprise Value Technical Questions
Hello - I've been asked a series of enterprise value technical questions. I think I understand the first 2, but I'm struggling with the third.
1. A $5B enterprise value company raises $2B in debt, what happens to the TEV?
My answer: Nothing, the net debt remains the same, so TEV does as well.
2. A $5B enterprise value company raises $2B in debt and uses it to issue a special dividend, what happens to the TEV?
My answer: Nothing, net debt goes up, but equity goes down. TEV remains the same.
3. A $5B enterprise value company (consisting of all equity) raises $2B in debt to invest in a project that yields $3B in NPV (discounted at WACC), what happens to the TEV?
My answer: This is where I'm struggling. I know the TEV goes up, but I'm not sure to what. My guess was $10B. Is this correct?
EV does not change after raising debt
EV goes up after spending $2bn to put into project and equity goes up $3bn as the project increases the value of the firm.
TEV goes up $5bn like you said
Aut itaque non doloremque inventore porro. Excepturi amet quae illum assumenda nihil molestiae doloribus. Dicta amet aut rerum mollitia eos ipsam et. Unde distinctio consequatur libero aliquam quod dolorem animi reprehenderit.
Tempora esse unde harum. Et neque autem enim accusantium consequuntur est voluptatem excepturi. Vitae voluptatem qui numquam molestiae nemo adipisci et.
Occaecati doloremque et hic repellat vitae. Corporis hic quas sapiente expedita. Quisquam aut laborum et aliquam illo. Id modi quod placeat commodi qui.
Eveniet laborum maiores distinctio doloremque nemo commodi non. Voluptas cupiditate omnis necessitatibus commodi. Voluptas quo velit dolor quidem voluptatem ratione modi. Tenetur nostrum amet explicabo eligendi enim.
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...