The equation is for more for "cost to buy". For your company A, you need to pay 0 to buy all its share, and also pay 100M to the lender to have full-control of

The equation is for more for "cost to buy". For your company A, you need to pay 0 to buy all its share, and also pay 100M to the lender to have full-control of the company. For your company B, you need to pay 100M to buy all its share, and also pay 0 for the debt. So they are both going to cost 100M for you as potential buyer. To expand a little bit, actually the "cost to buy" should exactly be how "valuable" it is. But why does it feel counterintuitive? Because when we're thinking about buying something, we usually don't really logically. Say you want to buy a car at $10000. But it also has a broken AC and you have to fix, which costs you $1000. At the end of the day, to buy a "car with a working AC" you paid $11000. That's the value of the car. But most people will think they "spent $10000 to buy car that actually only worth $9000". Is that true? For a totally fair market, you CANNOT buy the same car with working AC for $10000. It would be priced as $11000. Same goes for the company -- a company the has exactly "same" inherent value", whatever that means, but no debt, would have higher market value than the one with. So the market value, at least in theory, already reflected that difference. Hence you can add it together with the debt to get its "true value".