Note that we are usingthe market value of equity of the
consolidatedsubsidiary;ifithadbeenaprivatebusiness,we
would have had to estimate the market value of equity.
This measure of enterprise value includes the minority
holdinginLatinWorks.Ifwewanttoexcludethatholding,
we would have to net out the estimated value from the
measure:
Again,weareusingtheestimatedmarketvalueofequityof
LatinWorks in this calculation.
Finally,wecanalsoestimatetheenterprisevalueofjustthe
parentcompanybyeliminatingallofthemajorityholding’s
effects on enterprise value:
Scaling Variable
Theconsistencyprinciplerequiresustoscalefirmvalueto
variablesrelatedto thefirm,ratherthanequity.Ingeneral,
thesevariablescanbecategorizedintoearnings,bookvalue,
revenue, and activity variables. In this section, we will
consider our choices.
Earnings Variables
When scaling equity value, we used measures of equity
earningssuchasnetincomeandearningspershare.Toscale