easy · Investment Banking implied-share-price
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 effective tax rate against non-consolidated industry peers.
- EBITDA includes 100% of the subsidiary's earnings, so the numerator must reflect 100% of the subsidiary's value.
- NCI represents a recurring cash inflow that gets added to the enterprise's cash balance to determine net acquisition cost.
- It ensures the multiple is anchored to the book value of equity rather than its market trading value.
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