medium · Investment Banking implied-share-price

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 weight assigned to debt.
3. Enterprise Value remains constant because the underlying operating assets of the business have not changed at all.
4. Enterprise Value increases because the company's cost of debt rises automatically whenever equity value rises too.

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