Equity Value - Calculating Equity Value

Calculating Equity Value

Equity value can be calculated two ways, either the intrinsic value method, or the fair market value method. The intrinsic value method is calculated as follows:

Equity Value = Market capitalization + Amount that in-the-money stock options are in the money + Value of equity issued from in-the-money convertible securities - Proceeds from the conversion of convertible securities

The fair market value method is as follows:

Equity Value = Market capitalization + fair value of all stock options (in the money and out of the money), calculated using the Black–Scholes formula or a similar method + Value of convertible securities in excess of what the same securities would be valued without the conversion attribute

The fair market value method more accurately captures the value of out of the money securities.

Financial markets

Types of stocks	Common stock Golden share Preferred stock Restricted stock Tracking stock

Share capital	Authorised capital Issued shares Shares outstanding Treasury stock

Participants	Broker-dealer Floor broker Floor trader Investor Market maker Proprietary trader Quantitative analyst Stock trader

Exchanges	Electronic communication network Market opening times Over-the-counter List of stock exchanges Multilateral trading facility

Stock valuation	Alpha Arbitrage pricing theory Beta Book value Capital asset pricing model Dividend yield Earnings per share Earnings yield Dividend discount model Security characteristic line Security market line T-Model

Trading theories and strategies	Algorithmic trading Buy and hold Concentrated stock Contrarian investing Day trading Efficient-market hypothesis Fundamental analysis Growth stock Market timing Modern portfolio theory Momentum investing Mosaic theory Pairs trade Post-modern portfolio theory Random walk hypothesis Style investing Swing trading Technical analysis Trend following

Related terms	Block trade Cross listing Dark liquidity Dividend Dual-listed company DuPont analysis Flight-to-quality Haircut Initial public offering Margin Market anomaly Market capitalization Market depth Market manipulation Market trend Mean reversion Momentum Open outcry Public float Public offering Rally Reverse stock split Short selling Slippage Speculation Stock dilution Stock split Trade Uptick rule Volatility Voting interest Stock market index

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