Equity value can be calculated in two ways, either the
intrinsic value method, or the
fair market value method. The intrinsic value method is calculated as follows: Equity Value =
Market capitalization + Amount that in-the-money
stock options are in the money + Value of
equity issued from in-the-money
convertible securities - Proceeds from the conversion of convertible securities The fair market value method is as follows: Equity Value = Market capitalization + fair value of all stock
options (in the money and out of the money), calculated using the
Black–Scholes formula or a similar method + Value of
convertible securities in excess of what the same securities would be valued without the conversion attribute The fair market value method more accurately captures the value of out of the money securities. ==References==