medium · Investment Banking
A company has $500.0 million in debt and $100.0 million in cash. Its share price is $10.00 with 100.0 million shares.
If the company takes its $100.0 million in cash and pays off $100.0 million of debt, what happens to the Enterprise Value?
- Enterprise Value increases because the company is now less risky
- Enterprise Value decreases because the cash balance is now zero
- Enterprise Value remains unchanged
- Enterprise Value decreases because the company has less debt
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