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16 September, 07:35

Given the following information, what is the market value of XYZ Corporation? Common stock 13.6 million shares outstanding, selling at $31 per shareBond issue 1 $600 million total face value, selling at 98 percent of parBond issue 2 $150 million total face value, selling at $950 per bondA) $697.52 millionB) $874.82 millionC) $987.24 millionD) $1,049.43 millionE) $1,152.10 million

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  1. 16 September, 09:42
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    option (E) $1,152.10 million

    Explanation:

    Data provided in the question:

    outstanding Common stock = 13.6 million shares

    Selling price = $31 per share

    Total face value of bond Issue 1 = $600 million

    selling at 98% of par

    Total face value of bond Issue 2 = $150 million

    selling at $950 per bond

    Now,

    Shareholder's equity = Share selling price * number of shares outstanding

    = $31 * 13.6 million

    = $421.60 million

    Value of bond 1 = Total face value * price %

    = $600 million * 98%

    = $588 million

    Value of bond 2 = (Total face value * price) : 1000

    = ($150 million * 950) : 1000

    = $142.50 million

    Therefore,

    Market value of firm = $421.60 million + $588 million + $142.50 million

    = $1,152.10 million

    Hence,

    The correct answer is option (E) $1,152.10 million
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