What happens to enterprise value if a company raises $100.0m debt and holds it on its balance sheet as cash?
A)EV remains the same
B)EV increases by $100.0m
C)EV decreases by $100.0m
D)EV decreases by $200.0m

Question

Quizplus · Accepted Answer

Enterprise value (EV) is calculated as the sum of a company's market capitalization, debt, minority interest, and preferred stock, minus total cash and cash equivalents. If a company raises $100.0m debt and holds it on its balance sheet as cash, there is no change in the EV calculation as the increase in debt is offset by the increase in cash and therefore the EV remains the same.

What Happens to Enterprise Value If a Company Raises $100