A firm has a market capitalization of $2 million,market value of interest bearing debt of $1 million,book value of interest bearing debt of $500,000 and cash of $100,000. What is the enterprise value?

Question

Quizplus · Accepted Answer

Enterprise value is calculated as the sum of market capitalization, market value of interest-bearing debt, and preferred equity minus cash and cash equivalents.

Using the given figures: 
Enterprise value = ($2 million + $1 million) - $100,000 
Enterprise value = $3 million - $100,000 
Enterprise value = $2.9 million

Therefore, the answer is B.

A Firm Has a Market Capitalization of $2 Million,market Value