Based on the corporate valuation model, Gay Entertainment's total corporate value is $1,200 million. The company's balance sheet shows $120 million of notes payable, $300 million of long-term debt, $50 million of preferred stock, $180 million of retained earnings, and $800 million of total common equity. If the company has 30 million shares of stock outstanding, what is the best estimate of its price per share

Question

Antoine Hill

Business

1 May, 23:36

Based on the corporate valuation model, Gay Entertainment's total corporate value is $1,200 million. The company's balance sheet shows $120 million of notes payable, $300 million of long-term debt, $50 million of preferred stock, $180 million of retained earnings, and $800 million of total common equity. If the company has 30 million shares of stock outstanding, what is the best estimate of its price per share

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Answers (1)

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Coleman Winters · Answer 1

The best estimate of its price per share is $24.33 per share.

Explanation:

For computing the best estimate price per share, first we have to calculate the market value of equity, than divide by stock outstanding.

In mathematically,

= Market value of equity : Stock outstanding

where,

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

= $1,200 - $120 - $300 - $50

= $730 million

Now put this value to the above formula which is equals to

= $730 million : 30 million shares outstanding stock

= $24.33 per share

Hence, the best estimate of its price per share is $24.33 per share.