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# Answer to Question #13223 in Other Management for John

Question #13223
Based on the corporate valuation model, the value of a company&rsquo;s operations is \$1,200 million. The company&rsquo;s balance sheet shows \$80 million in accounts receivable, \$60 million in inventory, and \$100 million in short-term investments that are unrelated to operations. The balance sheet also shows \$90 million in accounts payable, \$120 million in notes payable, \$300 million in long-term debt, \$50 million in preferred stock, \$180 million in retained earnings, and \$800 million in total common equity. If the company has 30 million shares of stock outstanding, what is the best estimate of the stock&rsquo;s price per share? a. \$24.90 b. \$27.67 c. \$30.43 d. \$33.48 e. \$36.82
1
2012-08-17T08:17:35-0400
b. \$27.67
Market Value of company = 1200M + 100M = 1300M
MV of company = MV of debt + MV of preferred + MV of equity = 420M + 50M + MV Equity
=&gt; MV Equity = 1300M - 420M - 50M = 830M (assume book value of debt approximately = MV debt)
=&gt; share price = 830/30 = \$27.67

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