hard · Investment Banking
What is the primary reason why Enterprise Value (EV) is used as the numerator for EBITDA multiples instead of Equity Value?
- Equity Value cannot be calculated for companies with high levels of debt
- EBITDA is available to all capital providers, so the numerator must reflect the total value of the firm
- EBITDA excludes depreciation, which is only relevant to equity holders
- Enterprise Value is more stable than Equity Value across different industries
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