easy · Investment Banking
In the context of the EV/EBITDA multiple, how does adding Noncontrolling Interest (NCI) to the numerator achieve the 'Matching Principle'?
- It allows the analyst to compare the company's tax rate with those of its non-consolidated peers.
- EBITDA includes 100% of the subsidiary's earnings, so the numerator must reflect 100% of the subsidiary's value.
- NCI represents a cash inflow that is added to the enterprise cash balance to find the net cost.
- It ensures that the multiple is based on the book value of equity rather than the market value.
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