NNN is a company financed by both equity and debt.

NNN is financed by both equity and debt, and the directors specifically want the value of the equity. Valid approaches are:

A. Total earnings × P/E ratio – Correct

Using a suitable sector or market price–earnings multiple and multiplying by NNN’s earnings gives an estimate of the equity value directly.

B. Cash flow to all investors discounted at WACC less the value of debt – Correct

Discounting free cash flow to the firm (to all investors) at the WACC gives the enterprise value (debt + equity). Subtracting the market value of debt then leaves an estimate of the equity value.

C. Cash flow to all investors discounted at WACC – Not sufficient

This gives the total firm value, not just the equity. On its own, it doesn’t answer the question.

D. Cash flow to equity discounted at the cost of equity less the value of debt – Incorrect

Discounting cash flow to equity at the cost of equity already produces equity value. Subtracting debt again would be conceptually wrong (double counting).

E. Cash flow to equity discounted at the cost of equity – Correct

This is the standard free cash flow to equity (FCFE) valuation method and directly yields the value of equity.

So the appropriate methods here are A, B and E.