Answer: Enterprise value

## Explanation When calculating an EBITDA multiplier (EV/EBITDA), the most appropriate numerator is **Enterprise Value (EV)**. **Why Enterprise Value?** - Enterprise Value represents the total value of the firm to all stakeholders (both equity and debt holders) - EV = Market Value of Equity + Market Value of Debt - Cash and Cash Equivalents - EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a measure of operating performance available to all capital providers - Using EV in the numerator ensures that the multiple reflects the total firm value relative to its operating earnings **Why not the other options?** - **Equity value**: This only represents the value to equity holders, not the entire firm - **Market value of debt**: This represents only the debt portion of the capital structure For leveraged firms, EV/EBITDA is particularly useful because it removes the effects of different capital structures and tax rates.

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