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CORPORATE FINANCE • Valuation Multiples
Enterprise Value (EV): Definition, Formula, Calculation & M&A Multiples
Complete guide to Enterprise Value (EV) — comprehensive formula, equity value vs. enterprise value, net debt reconciliations, and EV/EBITDA transaction multiples.
By David Sterling, CFA • Reviewed by Stanley Parker, CPA, ABV • November 4, 2026
Key Takeaways
- Enterprise Value represents the true economic price required to acquire 100% of a company, accounting for debt obligations assumed and cash pocketed.
- EV formula adds Total Debt, Preferred Equity, and Non-Controlling Interests to Market Capitalization, then subtracts Cash and Equivalents.
- Unlike Price-to-Earnings (P/E), EV multiples (EV/EBITDA, EV/Sales) are capital structure-neutral, enabling valid comparisons between debt-heavy and debt-free companies.
- A company with high cash reserves and zero debt can have an Enterprise Value substantially lower than its equity Market Capitalization.
Core Valuation Formulas Corporate Metrics
Enterprise Value (EV) Mkt Cap + Debt - Cash
Total Takeover Cost Capital Neutral
Free Cash Flow (FCF) CFO - CapEx
Operating Cash Surplus Unlevered FCF for DCF
Weighted Average Cost of Capital WACC = (E/V)Re + (D/V)Rd(1-t)
Discount Rate Hurdle Rate for Projects
Essential Corporate Finance & Valuation Guides
Corporate Finance
Enterprise Value (EV): Definition, Formula, Calculation & M&A Multiples
Complete guide to Enterprise Value (EV) — comprehensive formula, equity value vs. enterprise value, net debt reconciliations, and EV/EBITDA transaction multiples.
By David Sterling, CFA
Corporate Finance
Free Cash Flow (FCF): Definition, Formula, Calculation & Analysis
Master Free Cash Flow (FCF) — formulas for FCFF and FCFE, step-by-step cash flow statement reconciliations, CapEx adjustments, and valuation multiples.
By Connor Fitzgerald, CFA