Valuing equities is harder than valuing bonds

FINANCIAL PRUDENCY on Instagram: "Valuation — Explained Valuation is the process of determining how much a company is worth. . Common ways companies are valued: Market Capitalization: Share price × number of shares. Example: $50 share price × 10M shares = $500M value. . Earnings or Revenue Multiples: Compare the company to similar businesses. Example: If similar firms trade at 5× earnings and a company earns $20M, it’s worth $100M. Discounted Cash Flow (DCF): Estimate future cash flow and conver

The best way to solve these types of problems that ask what happens to value during a certain circumstance, whether a financing or investing activity, is to write the equation from Equity Value to Enterprise Value vertically. Then figure out how each line item changes within the equation. In this case, the only change is that Cash is decreasing by $75M. There is no change to Equity Value, Debt, Preferred Stock, or Noncontrolling Interest. Now put this change back into the equation, which is just