Over the years,O'Brien Corporation's stockholders have provided $20,000,000 of capital,when they purchased new issues of stock and allowed management to retain some of the firm's earnings.The firm now has 1,000,000 shares of common stock outstanding,and it sells at a price of $38.50 per share.How much value has O'Brien's management added to stockholder wealth over the years,i.e.,what is O'Brien's MVA?

Question

Quizplus · Accepted Answer

Market Value Added (MVA) is calculated as the difference between the market value of the firm's equity and the capital supplied by shareholders. The market value of equity is 1,000,000 shares * $38.50 = $38,500,000. The capital supplied by shareholders is $20,000,000. Therefore, MVA = $38,500,000 - $20,000,000 = $18,500,000.

Over the Years,O'Brien Corporation's Stockholders Have Provided $20,000,000 of Capital,when