Please answer the finance question. The questions need to be answered within 1 h
ID: 2733849 • Letter: P
Question
Please answer the finance question. The questions need to be answered within 1 hour, that is the deadline. Please answer the question within 1 hour and show all your work. If you cannot show all of your work or do not know how to do the problems, then please do not answer the question.
5. Based on the corporate valuation model, Greshak Corp's value of operations is $825 million. Its balance sheet shows $290 million of current assets which includes $60 million of short-term investments that are unrelated to operations, as well as $105 million of accounts payable, $85 million in accrued taxes, $125 million of notes payable, $225 million of long-term debt, $50 million of common stock (par plus paid-in-capital), $20 million in preferred stock, and $360 million of retained earnings. If the company has 26 million shares of stock outstanding, what is the best estimate of the stock's price per share? YOU MUST SHOW ALL WORK TO RECEIVE CREDIT!
Explanation / Answer
Answer:-
Value of operations:$825
Short-term investments:$60
Notes payable:$125
Long-term debt:$225
Preferred stock$20
Shares outstanding: $26
Assuming that the book value of debt is close to its market value, the total market value of the company is:
Total market value= Value of operations + Value of non-operating assets= $825 + $60= $885
Value of Equity= Total MV-Long- and Short-term debt and preferred = $515
Stock price= Value of Equity/Shares outstanding = $19.81