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5 June, 15:15

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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  1. 5 June, 18:19
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    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.
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