If enterprise value is $600 and debt is $200, what is the market value of equity?

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Study for the Finance and Investment Challenge Test. Approaches include flashcards and multiple-choice questions with hints and explanations. Ready yourself to ace the exam!

Multiple Choice

If enterprise value is $600 and debt is $200, what is the market value of equity?

Explanation:
The amount attributable to all providers of capital is enterprise value, which equals the value of equity plus debt minus cash. If cash isn’t specified, it’s common to treat it as zero for these calculations. So, Equity value = EV − Debt = 600 − 200 = 400. If cash were present, you’d add it back: Equity = EV − Debt + Cash, but with no cash given, the market value of equity is 400.

The amount attributable to all providers of capital is enterprise value, which equals the value of equity plus debt minus cash. If cash isn’t specified, it’s common to treat it as zero for these calculations. So, Equity value = EV − Debt = 600 − 200 = 400. If cash were present, you’d add it back: Equity = EV − Debt + Cash, but with no cash given, the market value of equity is 400.

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