In a company that owns 70% of a subsidiary, what does Minority Interest represent in EV calculations?

• A. The 30% non-controlling interest
• B. The 70% controlling interest
• C. The parent company's cash
• D. The entire subsidiary's equity

Answer: (A)

Minority Interest represents the portion of the subsidiary that the parent does not own. With a 70% stake, 30% is owned by other shareholders, so this 30% is the non-controlling interest. In enterprise value calculations, you include the value of that non-controlling portion because EV reflects the value of the entire subsidiary if it were 100% owned. In other words, EV adds the 30% of the subsidiary's equity that belongs to others, not the parent’s cash, nor the entire subsidiary’s equity.