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17 December, 05:20

Over the years, Masterson Corp's stockholders have provided $34,000,000 of capital when they purchased new issues of stock and allowed management to retain some of the firm's earnings. The firm now has 2,000,000 shares of common stock outstanding, and the shares sell at a price of $28 per share. How much value has Masterson's management added to stockholder wealth over the years, that is, what is Masterson's MVA?

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  1. 17 December, 08:56
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    Answer: $22,000,000

    Explanation:

    Initial capital provided by stockholders = $34,000,000

    common stock outstanding = 2,000,000 shares

    Selling price of each share = $28

    MVA = Current market value - Initial capital provided by stockholders

    = (2,000,000 x $28) - $34,000,000

    = $ (56,000,000 - 34,000,000)

    = $22,000,000
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