Market
Value of Debt from Market Value of Equity
Market Value of debt can be calculated from the relationship
between Total value of entity, market value of debt and market value of equity.
This relationship has been explained by following formula
Vt= Ve + Vd
Vt= Total Market Value
Ve= Market Value of equity
Vd= Market Value of debt
Market
Value of Equity Example
ABC Company has current
value of 350 million, equity market value is 100, calculate debt market value?
Vd=
Vt-Ve
Vd=
350-100
Vd=
250 (Market value of equity)
