NOTES
1. Enterprise value is typically defined as being equal to market value of common stock plus market value of preferred stock plus market value of debt minus excess cash and cash equivalents.
2. To estimate the growth rate for an exercise such as this, one might use I/B/E/S or consensus forecasts.
3. Other, more complicated models can be used to accomplish this same task, but the math is somewhat more complex.
4. All data were as of November 16, 2004.
a Reprinted from CFA Institute Conference Proceedings: Analyzing, Researching, and Valuing Equity Investments (June 2005):15–28. When this article was originally published, Robert Parrino, CFA, was director of the Hicks, Muse, Tate & Furst Center for Private Equity Finance in the McCombs School of Business at the University of Texas at Austin.
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