Hey Everybody, I apologize if this is in the wrong forum, but doing interview prep and ran across this question for calculating EV that I don't get. Super lost, and sorry if this is a stupid question...I got a lot to learn. I am given the share count ($10), # of shares (200M), net debt (300m), total cash (80M), accumulated depreciation (125M), and excess cash (30M). I am confused about the relationship between excess cash and total cash and how that should be calculated to get EV. Does total cash include excess cash?
Currently I have:
So when we talk about equity vs enterprise value, we say equity value pertains to what’s only available to EQUITY investors within a firm. I know this but how can I think about this conceptual? Also when we compare enterprise value to equity value in terms of what changes are made, we say Enterprise is core business only but equity value is both core and non core. Why? To get from equity value to enterprise value, you’re adding in many components so shouldn’t it be the other way around ?
To calculate enterprise value, I need to add debt and subtract cash from equity.
The company issues notes and repos. Are those considered debt for the sake of this calculation?
The company (it is a bank) temporarily owns short-term loans before selling those to third-party investors. Are those considered cash for the sake of EV calculation?
I'm currently studying for CFA level III and going through some valuation concepts for upcoming interviews, and I'm a bit confused with some of the notions surrounding enterprise value. In Breaking Into Wall Street's IB interview guide, it says the following:
"If you say that Debt “adds to” Enterprise Value, you’re implying that raising Debt can change a
company’s Enterprise Value – which is not true!"
So how do you get valuation when you acquire less than 50% of the company's equity and no change in ownership happens?
I mean, you can certainly value the 100% company and multiply the EV/Equity Value by % you wanna acquire. But do you need to get Enterprise Value when you only buy a minority stake? Do you need to assume/refinance the existing debt (hence EV is calculated)?
What happens when a company issues a $100mm stock repurchase? Assuming equity value decreases by taking shares outstanding out of the equation , which is offset by decrease in cash (assuming we use cash to repurchase shares) so EV remains neutral. Just wanted to see if/how my logic was flawed here. Thanks!
Hi! I hope this is the right forum for my question, Im new to WSO :)
In short, I struggle with two things:
To my understanding represents the total sum of all [Net Income - Dividends] paid over all FYs of a companys lifetime. Now, when I consider huge, profitable companies that are around for decades, this should result in massive values for retained earnings?! Why is this not the case?
Quick question on something that has been confusing me from some of the interview guides. When a company issues dividends, many of the guides say that this does not impact enterprise value. Given the formula for enterprise value, I am having a hard time seeing how that is the case.
When doing something like EV/SALES or EV/EBITDA should you use an EV based on a weighted average shares market value since that captures share changes over time (like IS items) or is it OK to go ahead and use an EV based on the latest fully diluted market value?