Valuation Topics

RE: TEV and negative net debt clarification

Net debt of negative is fine! Why? Because it means that there's excess cash for shareholders to take out of the company and so equity value is larger than tev a- perfectly fine. Think of msft!

Glad you enjoyed the classes!

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by WST Expert 1.

added 11 years ago

RE: TEV and negative net debt clarification

That's what I thought. So why not use a logical if statement as the formula instead of overwriting the formula that is currently in the TEV cell?

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by Guest 1.

added 11 years ago

RE: TEV and negative net debt clarification

What would the if statement say? You still reduce tev by the negative net debt. You don't suddenly exclude it.

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by WST Expert 1.

added 11 years ago

RE: TEV and negative net debt clarification

Using TEV as a starting point versus equity value is something I found to be especially useful from your session yesterday. I'm not accustomed to using TEV and so I'm perhaps slower than I should be in picking up the nuances of it. I thing I got your point though. It just seems counter intuit... Read More

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by Guest 1.

added 11 years ago

RE: TEV and negative net debt clarification

When we have more time in our longer courses, we go thru this simple explanation: If I buy your company for $100MM and there is $10MM of excess cash on the books, and you aren't allowed to touch it b/c you sold it to me, I have effectively paid a total of $100MM less $10MM b/c I take the cash and... Read More

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by WST Expert 1.

added 11 years ago

Re: TEV and negative net debt clarification

Even after watching the Corporate Valuation video and reading your previous responses, I still feel a bit unclear about Equity Value being greater than Enterprise Value. I think going over my understanding of these topics might help you identify where my confusion lies. Under an 'unlevered' valuat... Read More

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by Guest 1.

added 11 years ago

Re: TEV and negative net debt clarification

You are confusing the concept of Equity Value/Enterprise Value with DCF. WACC is used in the DCF because it is discounting cash flows to the entire firm (vs cost of equity and Equity Value). Once you arrive at your DCF value (TEV as of today), you're done with DCF. No more reference to WACC. Then... Read More

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by WST Expert 1.

added 11 years ago

Re: TEV and negative net debt clarification

I appreciate your prompt and thorough repsonse!

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by WST Expert 1.

added 11 years ago

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