Enterprise Value

CFA Level II
#1

Does note payable include in the debt component in calculating Enterprise Value?

Is note payable equivalent to short term debt?

#2

The debt component of EV is the Market Value of Debt and not the BV of Debt. Usually, from what I experienced with doing multiple problems, MVD is usually given.

#3

If market value of note payable is given, do I need to add it?

#4

I’ve the same question. I suppose note payable is not included in EV, but I’m not sure.

Can anyone confirm it?

#5

EV=MVD+MVE+MVP+Minority interest-Cash-short term investment

#6

Yes, but is Note Payable short term debt ?

#7

yes, it is short term debt, even account payable is short term debt. But in order to come up with the EV, we need to use market value, not the book value

#8

I’m agree with you that we must use the Market value for EV.

But for me, the Note payable is in Market Value. So, (the market Value of ) Note Payable is included in EV.

#9

I had the same question subsequent to a topic test, I don’t remember exactly which was it. There is a thread in which we agreed that BECAUSE notes payable SOUNDS TO BE S/T debt, they don’t add it to the EV.

But I have not found clear answer in the curriculum or Schweser about it.

#10

I mean Note Payable may be subtracted from EV. And it’s sure that Note Payable is not added to EV.

The question is: Note Payable is subtracted from EV or__it is not included in the calculation of EV?

#11

Note payable is short term debt. Why it is subtracted from EV, not add on?

#12

Sorry :)) and you are right. I dont know why I thought short term debt was subtracted from the EV.

#13

The question is: Note Payable is add to EV or__it is not included in the calculation of EV?

#14

No, it isn’t.

Debt bears interest. Accounts payable generally does not bear interest, so it isn’t debt.

#15

Notes payable are debt.

They could be short-term or long-term.

#16

Thanks s2000magician.

The conclusion is: Note payable is debt, so note payable is added to the EV.

#17

In this case the topic test is erroneous. They did not include the notes payable into the EV calculation alongside with all other (interest bearing) debt.

#18

if you do Topic test Metev on Equity, they do not add Note payable to EV calculation