Valuable Incorporated's stock currently sells for $45 per share. The firm has 20 million share of common outstanding. The firm's total debt equals $600 million and its common equity equals $400 million. What is the firm's market value added

The firm's market value added is $500,000,000

Explanation:

According to the given data we have the following:

Stock market price per share = $ 45

No of shares = 20,000,000

Therefore, Market value of equity = MPS * no of shares

$45*20,000,000 = $ 900,000,000

Invested capital or common equity = $400,000,000

Therefore, in order to calculate the firm's market value added we would have to make the following calculation:

Market value added = Market value of stock - invested capital

Market value added = $900,000,000 - $400,000,000

Market value added = $500,000,000

The firm's market value added is $500,000,000