value of Broadway-Brooks Inc.'s operations is $900 million, based on the corporate valuation model Its balance sheet shows $70 million in accounts receivable, $50 million in inventory, $30 million in short-term investments that are unrelated to operations, $20 million in accounts payable, $110 million in notes payable, $90 million in long-term debt, $20 million in preferred stock, $140 million in retained earnings, and $280 million in total common equity If the company has 25 million shares of stock outstanding, what is the best estimate of the stock's price per share?

Question

Quizplus · Accepted Answer

The value of operations is $900 million. Subtract non-operating assets ($30 million in short-term investments) and add back liabilities and equity not related to operations (accounts payable, notes payable, long-term debt, preferred stock). The equity value is then divided by the number of shares to find the price per share: ($900M - $30M + $20M + $110M + $90M + $20M) / 25M shares = $28.40 per share.

Value of Broadway-Brooks Inc