Reading 60: Equity Valuation: Concepts and Basic Tools-LOS b 2011, valuation, relative, center, equity

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Session 14: Equity Analysis and Valuation
Reading 60: Equity Valuation: Concepts and Basic Tools

LOS b: Describe major categories of equity valuation models.

 

 

An equity valuation model that values a firm based on the market value of its outstanding debt and equity securities, relative to a firm fundamental, is a(n):

A) asset-based model.

B) market multiple model.

C) enterprise value model.

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An enterprise value model relates a firm’s enterprise value (the market value of its outstanding equity and debt securities minus its cash and marketable securities holdings) to its EBITDA, operating earnings, or revenue.