EV & Equity Value

Question 1

What is the treatment of Unfunded pensions with enterprise value?

Answer 1

With a defined plan, such as a plan promising 10bil to employees but only set aside 7bil, you must still add the 3bil to find enterprise value as it represents a funding source to ‘employees’

Question 2

If unfunded pensions are added back what else are we doing to get EBIT/EBITDA?

Answer 2

Add back financing expenses that affect operating income related to unfunded pensions (so we’re excluding them)

dont touch TRUE operating expenses such as servicing costs - However most costs related to unfunded pensions are financial in nature

Question 3

What is an Equity Investment/ Associate Company

Answer 3

Minority stake - above 20, less than 50% ownership

Question 4

Noncontrolling Interest

Answer 4

Above 50, less than 100%