World Library  
Flag as Inappropriate
Email this Article

Equity value

Article Id: WHEBN0002891127
Reproduction Date:

Title: Equity value  
Author: World Heritage Encyclopedia
Language: English
Subject: Control premium, Mathematical finance, Alstom, Maple Leaf Sports & Entertainment
Collection: Fundamental Analysis, Mathematical Finance
Publisher: World Heritage Encyclopedia

Equity value

Equity value is the value of a company available to owners or shareholders. It is the enterprise value plus all cash and cash equivalents, short and long-term investments, and less all short-term debt, long-term debt and minority interests.

Equity value accounts for all the ownership interest in a firm including the value of unexercised stock options and securities convertible to equity.

From a mergers and acquisitions to an academic perspective, equity value differs from market capitalization or market value in that it incorporates all equity interests in a firm whereas market capitalization or market value only reflects those common shares currently outstanding.

Calculating Equity Value

Equity value can be calculated two ways, either the intrinsic value method, or the fair market value method. The intrinsic value method is calculated as follows:

Equity Value = 
Market capitalization 
+ Amount that in-the-money stock options are in the money
+ Value of equity issued from in-the-money convertible securities 
- Proceeds from the conversion of convertible securities

The fair market value method is as follows:

Equity Value = 
Market capitalization 
+ fair value of all stock options (in the money and out of the money), calculated using the Black–Scholes formula or a similar method
+ Value of convertible securities in excess of what the same securities would be valued without the conversion attribute

The fair market value method more accurately captures the value of out of the money securities.

This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.

Copyright © World Library Foundation. All rights reserved. eBooks from Project Gutenberg are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.