Based on the corporate valuation model, the total corporate value of chen lin inc. is $900 million. its balance sheet shows $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 its stock price per share?

Question

Suzy

Business

24 November, 17:51

Based on the corporate valuation model, the total corporate value of chen lin inc. is $900 million. its balance sheet shows $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 its stock price per share?

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Serena Gibson · Answer 1

Stock price would be equal to total value of equity divided by no. of shares outstanding. The total value of equity would be calculated as follows:

Total value of equity = corporate value - notes payable - long term debt - preferred stock

= $900 million - $110 million - 90 million - 20 million

= $680 million

The price of the stock would be:

Stock price = total value of equity / no. of shares outstanding

= $680 million / 25 million

= $27.20