Re: Leveraged companies versus cash rich companies
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this isn't quite how it works. you can't just add debt and market cap and get the "EV" of the company - the more leveraged the company is, the more incorrect this becomes.
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EV (enterprise value) is a good theoretical framework for comparing companies with wildly different capital structures. I can't see how thinking of shares as call options is as useful or accurate.
First, EV is simple to use. Second, shares have valuable features that options don't have.
1) Stocks provide voting rights.
2) Stocks provide a claim to cash flows, primarily as dividends.
3) Stocks never have an expiration date.
Of course EV often does overvalue cash rich companies, because dead cash on a balance sheet isn't as useful as cash in your pocket. Whitman's "Value Investing" is all about the importance of capital structure as a determinant of value, and the importance of where you lie in that structure and how much influence you can or need to have to determine what the real value of your investment is.
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