Based on the corporate valuation model, the total corporate value of Chen Lin Inc. is $500 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

The best estimate of its stock price per share is $11.20

Explanation:

To compute stock price per share, the equation is shown below:

= Total number of equity : Outstanding number of shares

where,

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

= $500 - $110 - $90 - $20

= $280 million

And, outstanding number of shares is 25 million shares

Now, apply the above equation

So, stock price per share = $280 million : 25 million shares = $11.20

Other accounts like retained earnings, total common equity is irrelevant

Hence, the best estimate of its stock price per share is $11.20