medium · Investment Banking

If a company’s share price increases, which of the following occurs mechanically in the calculation of Enterprise Value, assuming no change in fundamental operations or debt levels?

1. Enterprise Value increases because Equity Value increases, and more options potentially become in-the-money
2. Enterprise Value decreases because the higher equity value reduces the relative weighting of debt
3. Enterprise Value remains constant because the underlying operating assets have not changed
4. Enterprise Value increases because the cost of debt increases when equity value rises

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