What happens to the company's enterprise value when a premium is applied to the market capitalization?

When a premium is applied to the market capitalization, it effectively increases the perceived value of the company's equity in the market. The enterprise value (EV), which represents the total value of a company, combines market capitalization with debt and subtracts cash and cash equivalents.

Applying a premium to the market capitalization suggests investors are willing to pay more for the equity, reflecting an increase in the company's market valuation. This higher market cap, when calculated in the enterprise value formula, leads to an overall increase in the EV, assuming debt levels and cash remain unchanged. Therefore, the correct conclusion is that applying a premium to the market capitalization directly contributes to an increase in the company's enterprise value.