The calculation for enterprise value is ev=market cap+debt-cash. This is used to determine the value of a company. I understand that debt isn’t necessarily a bad thing and that any large company will leverage it to grow. However, this formula is making debt out to be a good thing. If a person was 3 million dollars in debt, we wouldn’t add that to their net worth. How debt considered value for a business? My other question has to do with discounted cash flows. Discounted cash flows discount the projected cash flows of a company into the present value. DCF is used to determine the intrinsic value of a company. When is it appropriate to use DCF or EV and which is better at determining value?
Thank you
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