From Enterprise Value to Equity Value in a DCF

HardFinance & Accounting00:00

Practice interviewer

In session

5 left

00:00

Your question is From Enterprise Value to Equity Value in a DCF. Take a moment with it on the right.

Talk me through your thinking if you like. When you're confident, submit your answer and I'll grade it like a real screen (7/10 or better passes).

You need to log in / sign up to chat or submit.

Problem

How do you walk from Enterprise Value to Equity Value in a DCF?

Asked in the Second Round (Associate) stage. Interviewer probed on adjustments including net debt, minority controlling interest, joint ventures, and preferred shares.

Use the illustrative bridge below to show the mechanics.

Given Financials

Item	Amount
Enterprise Value	$1,000
Debt	$250
Cash	$80
Preferred shares	$40
Minority interest	$30
Joint venture investments	$50

Task

Walk from Enterprise Value to Equity Value.
Explain why each adjustment is made.
Show how the answer changes if debt increases by $50 or the JV investment is excluded.

Assume all amounts are in millions and the DCF produces an enterprise value.