Question:

Why is debt added to Equity Value in the formula for Enterprise Value?

Answer hidden.

Answer:

When a company buys another company, they usually take on their financial obligations along with it which means that they would have to pay off any debts that the target company has.

For that reason, you must add the amount of debt that the target company has to their equity value to determine how much you would need to pay for the company.

Other

Enterprise & Equity Values

Should you use the book value or the market value of each item when calculating Enterprise Value?

Enterprise & Equity Values

Question:

Why is debt added to Equity Value in the formula for Enterprise Value?

Answer:

Other

Enterprise & Equity Values

Is it possible for a company to have a negative Equity Value? How?

Can a company have a negative Enterprise Value? How?

Why can't you use Equity Value / EBITDA as a multiple?

What is the difference between Equity Value and Shareholders' Equity?

How do you calculate Equity Value?

Why do you subtract cash in the Enterprise Value formula?

How do you calculate Fully Diluted Shares Outstanding?

What is the formula for Enterprise Value?

What are the four most common valuation multiples?

Why do you need to add Minority Interest to Enterprise Value?

Why do you add Minority Interest to Enterprise Value?

What is the difference between Enterprise Value and Equity Value?

Should you use the book value or the market value of each item when calculating Enterprise Value?

When acquiring a company, should you look at Enterprise or Equity Value?

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