If we choose to leave the value of minority holdings in
enterprisevalue(asmanyanalystsdo),wehavetocountthe
proportionate share of the subsidiaries’ cash, debt, and
operatingincomewhencomputingmultiples.Thatcanprove
tobeadauntingexercise,especiallywhentherearedozensof
cross holdings.
Book Value Variables
When computing price-to-book equity ratios, we used the
bookvalueofequityasourstartingpoint.Whencomputing
value multiples, we should work with the book value of
capital,thoughwemaymakeadjustmentsforcashholdings
andholdingsinothercompanies.Table9.2summarizesour
choices.
TABLE 9.2Value Measures and Book Value