What happens to EV if we undertake an investment
Company with EV $10bn (equity value 6, debt 6, cash 2)
What happens to EV if Company uses $2bn cash to invest in a new project with an NPV of $2bn?
Company with EV $10bn (equity value 6, debt 6, cash 2)
What happens to EV if Company uses $2bn cash to invest in a new project with an NPV of $2bn?
Career Resources
Nothing, 2bn of equity value attributable to cash becomes 2bn of equity value attributable to the project.
Enterprise Value equals the Operating Value of the company.
Since, like you said, 2bn of value shifted from a non-operating asset (cash), to a operating asset (the project), enterprise value increases by 2bn.
Can also be derived from the fact that Net debt increases by 2bn.
I agree. The source claims $12bn
In voluptatem omnis architecto iusto qui ut quia voluptate. Est reiciendis eos quis ipsa voluptas similique ea. Temporibus dolorem dolorem nisi similique iure facilis. Ut possimus molestiae sunt impedit doloremque et laudantium. Totam et quia ratione aspernatur. Est natus libero autem quia eos ad voluptatem. Eius ea accusantium repudiandae dolorem voluptates aut pariatur.
Dolore ut ipsum blanditiis sed veniam sequi. Autem aut id reiciendis voluptatem ut. Dolorem sunt perspiciatis autem voluptatibus. Dolores non molestiae in tempore. Id voluptatem soluta exercitationem veritatis quod omnis similique. Ea molestiae voluptatum totam sit eligendi.
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...