Why are the PV of future liabilities not included in the EV to equity bridge?

Dear WSO community,

I was wondering if someone knew the answer to the following question, please:

Why do we only use current market values for non-equity claims when calculating enterprise value when we do trading comparables? We also only use current market values when we back into equity value from enterprise value when we do a DCF valuation.

Why don't we need to discount future liabilities which arise, to today's date? If we know future debt will rise to support the cash flows that are forecast, then why do we not discount future debt to today's value and include it as a non-equity claim? 

The same is true with an item such as pension deficit. We all know to include it in the equity value to enterprise value bridge, but this deficit will almost certainly rise in the future, as the company grows.

Moreover, equity value i.e. market cap is the PV of cash flow into perpetuity attributable to equity investors, so why do we not use PV of non-equity claims into perpetuity as well? Are we not undervaluing equity by only using current claims?

Apologies if I am being dense, but I can't find the answer to this in any finance textbook, and there must be a simple explanation to this...

Thanks in advance to people that can clear this up for me.

Cheers

1 Comments
 
Most Helpful

Tenetur consequuntur praesentium fugiat dolor ut. Dolor magnam minima facere qui sed. Eos et distinctio modi dignissimos ut suscipit. Nostrum ea perferendis culpa sequi totam molestiae a. Ipsam quia quaerat ut est beatae est aliquid voluptatem. Dolor inventore omnis aut ea.

Career Advancement Opportunities

July 2026 Investment Banking

  • Evercore 01 99.4%
  • Moelis & Company 01 98.9%
  • JPMorgan 01 98.3%
  • Guggenheim Partners 01 97.7%
  • Morgan Stanley 07 97.1%

Overall Employee Satisfaction

July 2026 Investment Banking

  • Moelis & Company No 99.4%
  • Morgan Stanley 02 98.9%
  • Evercore 01 98.3%
  • BMO Capital Markets 12 97.7%
  • Banco Santander 01 97.1%

Professional Growth Opportunities

July 2026 Investment Banking

  • Evercore 01 99.4%
  • Moelis & Company 01 98.9%
  • Morgan Stanley 06 98.3%
  • Goldman Sachs 01 97.7%
  • JPMorgan 01 97.1%

Total Avg Compensation

July 2026 Investment Banking

  • Vice President (15) $434
  • Associates (46) $258
  • 3rd+ Year Analyst (8) $210
  • 2nd Year Analyst (22) $179
  • Intern/Summer Associate (13) $156
  • 1st Year Analyst (79) $150
  • Intern/Summer Analyst (73) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
kanon's picture
kanon
99.0
3
Secyh62's picture
Secyh62
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
dosk17's picture
dosk17
98.9
6
Betsy Massar's picture
Betsy Massar
98.9
7
DrApeman's picture
DrApeman
98.9
8
GameTheory's picture
GameTheory
98.9
9
CompBanker's picture
CompBanker
98.9
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”