Im Folgenden gehe ich einmal auf die einzelnen Bestandteile der Formel ein und erläutere, ob und mit welchem Bewertungsansatz … This indicates that Company ABC generated a profit of $0.50 for every $1 of shareholders’ equity and company XYZ has generated $0.13 for every $1 of … It is calculated by taking enterprise value, adding redundant assets, and then subtracting debt net of cash available. The formula for residual value has two components. The value of equity in an unlevered firm equals that of its value, which is determined using a simple calculation. In the context of a private business, equity value is the value of the company's shares and loans that the shareholders have made available to the business. As you may know, equity value is total assets minus total liabilities. It shows that investors believe in strong growth prospects of the company. It is the current book value of the equity plus the present value of future residual income. Given the fact that unlevered firms do not carry debt, they represent a substantially lower level of investment risk when compared to levered companies with debt financing. Equity Value = Enterprise Value - Debt & Debt Equivalents - Non-controlling Interest - Preferred Stock + Cash & Cash Equivalents. Equity value is the total value for the company's shareholders. In the above example, Company ABC has generated a 50% return on equity & company XYZ has generated a 13.33 % return on equity. To wrap up the example, if total shareholders’ equity is $100,000, the common equity is $100,000 minus $11,500 or $88,500. Add in residual value. For example, suppose a company will earn $1.00 per share forever, and the company also pays out all of this as dividends, $1.00 per share. If there are 1,000 common shares outstanding, the equity per common share is equal to $88,500 divided by 1,000, or $88.50. Market Value of Equity greater than Book Value of Equity Conversely, when the market value of equity is more than book value, it implies a strong financial position for the company. Divide it by the number of outstanding common shares to get the equity value per common share.