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The value of a business is what someone would be willing to pay for control over it, or its market cap (value of all shares). This is typically disconnected fro
by akhatri_aus 10y ago
The value of a business is what someone would be willing to pay for control over it, or its market cap (value of all shares). This is typically disconnected from its DCF which is a modelled value based on expected future returns.
Enterprise value is also market cap + net debt, not its cumulative present value DCFs.
[1] http://www.investopedia.com/terms/e/enterprisevalue.asp http://www.investopedia.com/terms/e/enterprisevalue.asp
- moomin 10y agoStrictly speaking market cap is what someone is willing to spend on a small portion of the company scaled up. The actual price someone is willing to pay for the whole thing is a different number, typically larger. It isn't the EV either, though
- berberous 10y agoA change of control of Ford would likely trigger a default under Ford's debt, at which point it must be paid back. So if you are not financing with debt, an acquiror would really need the $150bn EV in order to afford to acquire the company. Of course, in reality, an acquiror would either replace such debt with new acquisition financing or work out a way to keep the existing debt in place. DCF is indeed a method to estimate the fair value of a company's EV, not it's market cap. People will usually do a DCF, then subtract net debt in order to get an estimate of equity value from the DCF. Here's a citation: http://macabacus.com/valuation/dcf/overview http://macabacus.com/valuation/dcf/overview