Equity Value, MVIC, and Enterprise Value
What do they mean and how they are measured? Much confusion can be avoided by clearly defining the level of value utilized in a business appraisal. The terms equity value, enterprise value (EV) and market value of invested capital (MVIC) are often bantered with no clear delineation between them. This article delineates between these levels of value and discusses the ways in which they can be measured. The importance of understand these terms, and which level of value has been measured in an appraisal, is important to comply with statutory demands and to avoid the double-counting or mis-counting of assets/liabilities in a business transaction. Overview and Definitions Each level of value has its own specific application. Enterprise value tends to be the focus in the sale of a business. Equity value tends to be the focus in the sale/transfer of a fractional interest within a business. Market value of invested capital is typically used as a starting point to derive an equity level of...