What is the formula to determine a company's implied share price based on its Enterprise Value?

The correct formula to determine a company's implied share price based on its Enterprise Value is found by adjusting the Enterprise Value for the company's cash and debt. The calculation is expressed as Enterprise Value minus debt plus cash.

Starting from the definition of Enterprise Value, which represents the total value of a company as perceived by the market, it encompasses not just the equity value but also the company’s net debt (total debt minus cash). To derive the implied equity value, it is crucial to offset the Enterprise Value by subtracting the debt owed by the company (since this liability must be settled before equity holders have any claim on the company's assets) and adding back any cash (which can be used to pay down debt or distribute to shareholders).

This adjustment recognizes that the net financial position of the company affects the equity value attributable to shareholders. Thus, subtracting the debt (a claim against the company) and adding cash (resources available) can accurately reflect the value available to equity investors.

By following this formula, you arrive at the implied equity value, which can then be divided by the number of outstanding shares to yield the implied share price.