EV Calculation

Cumulative PV of FCF+ Perpetuity PV=Enterprise Value + Cash (FYE) + Marketable Securities - Value of Options Issued - Market Value of Debt = Equity Value / Diluted Shares Outstanding = Target Share Value Here value of option issued is subtracted for Equity value.but still Equity value is divided by diluted share count?? Is it wrong or am i missing something obvious

Options don’t dilute share count, only warrants do. If exercised the firm has to outlay the net value of the option, reducing the value of equity.

"Options don’t dilute share count, only warrants do. " is this correct? Joey if you see this pls clarify

Options also dilute share count (provided that they’re in the money)

yup, so the question still stands Cumulative PV of FCF+ Perpetuity PV=Enterprise Value + Cash (FYE) + Marketable Securities - Value of Options Issued - Market Value of Debt = Equity Value / Diluted Shares Outstanding = Target Share Value Here value of option issued is subtracted for Equity value.but still Equity value is divided by diluted share count??

I would argue that you subtract the TIME VALUE of the option at MARKET RATE then still divide by diluted share basis. If you subtract both time and intrinsic value of the option then divide by diluted share it seems you are double counting as you mentined… Let’s say EV (ex option’s) is $500MM Let’s say option value at issuance was $30MM Now Outstanding Shares is 50MM Diluted shares are 54MM The orginal equation would be 470/54 = 8.703 ------------------------------------------------------- I’d say subtract time value from EV (ex options) @ current rate (not at issuance) Assume Time Option value for OTM at current mkt rate is now $20MM But not all are ITM, so diluted shares is only 52MM thus EV would be 480/52 = 9.23

Do you really dig into time value and intrnsic vale of options for the purpose of EV