- I understand why the book says we use book value for common stock types that are not traded publicly, but why do we use the book rather than market value of preferred stock when we are tallying up enterprise value? Preferred is traded publicly, so I am confused. Is it b/c it is not traded “as actively?” 2) also, why is minority interest added – I assume b/c this is a “liability” that the acquirer of a target is now responsible for? this is volume 5 stuff, fyi.
I believe it’s because preferred is treated like debt here. It doesn’t have anything to do with its liquidity. Minority interest is added because it’s a portion of you that will be owned by another party once the dust has settled from the hypothetical transaction. In other words, you have something of value - their investment in you - and that value gets added to EV. daj224 Wrote: ------------------------------------------------------- > 1) I understand why the book says we use book > value for common stock types that are not traded > publicly, but why do we use the book rather than > market value of preferred stock when we are > tallying up enterprise value? Preferred is traded > publicly, so I am confused. Is it b/c it is not > traded “as actively?” > > 2) also, why is minority interest added – I > assume b/c this is a “liability” that the acquirer > of a target is now responsible for? > > > this is volume 5 stuff, fyi.
seerwright Wrote: ------------------------------------------------------- > I believe it’s because preferred is treated like > debt here. It doesn’t have anything to do with its > liquidity. > > Minority interest is added because it’s a portion > of you that will be owned by another party once > the dust has settled from the hypothetical > transaction. In other words, you have something of > value - their investment in you - and that value > gets added to EV. > > oh…hmm, ok. thanks.