Are there any problems with the Enterprise Value formula you just gave me?

Yes – it’s too simple. There are lots of other things you need to add into the formula with real companies: • Net Operating Losses – Should be valued and arguably added in, similar to cash. • Long-Term Investments – These should be counted, similar to cash. • Equity Investments – Any investments in other … Read more Are there any problems with the Enterprise Value formula you just gave me?

A company has 1 million shares outstanding at a value of $100 per share. It also has $10 million of convertible bonds, with par value of $1,000 and a conversion price of $50. How do I calculate diluted shares outstanding?

This gets confusing because of the different units involved. First, note that these convertible bonds are in-the-money because the company’s share price is $100, but the conversion price is $50. So we count them as additional shares rather than debt. Next, we need to divide the value of the convertible bonds – $10 million – … Read more A company has 1 million shares outstanding at a value of $100 per share. It also has $10 million of convertible bonds, with par value of $1,000 and a conversion price of $50. How do I calculate diluted shares outstanding?

Is it always accurate to add Debt to Equity Value when calculating Enterprise Value?

In most cases, yes, because the terms of a debt agreement usually say that debt must be refinanced in an acquisition. And in most cases a buyer will pay off a seller’s debt, so it is accurate to say that any debt “adds” to the purchase price. However, there could always be exceptions where the … Read more Is it always accurate to add Debt to Equity Value when calculating Enterprise Value?