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# Answer to Question #6533 in Economics of Enterprise for LaMarcus Streeter

Question #6533
4. Based on the corporate valuation model, the value of a company&rsquo;s operations is \$900 million. Its balance sheet shows \$70 million in accounts receivable, \$50 million in inventory, \$30 million in short-term investments that are unrelated to operations, \$20 million in accounts payable, \$110 million in notes payable, \$90 million in long-term debt, \$20 million in preferred stock, \$140 million in retained earnings, and \$280 million in total common equity. If the company has 25 million shares of stock outstanding, what is the best estimate of the stock&rsquo;s price per share? a. \$23.00 b. \$25.56 c. \$28.40 d. \$31.24 e. \$34.36
1
2012-02-17T07:12:59-0500
The right answer is C. \$28.40

We used the following equation:
Market Capitalization = (Shares Outstanding * Current Share Price) + Current Long-term Debt.
We can derive Current Share Price from here and it will be: (900-90-110)25 = \$28

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