Based on the corporate valuation model,the total corporate value of Chen Lin Inc.is $900 million.Its balance sheet shows $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 its stock price per share?
A)$22.03
B)$24.48
C)$27.20
D)$29.92
E)$32.91

Question

Quizplus · Accepted Answer

The corporate valuation model is: Total Corporate Value = Total Common Equity + Total Preferred Stock + Total Debt - Cash and Equivalents.
Using the information given in the problem, we get:
900 = 280 + 20 + 110 + 90 - X (where X is cash and equivalents)
X = 600
Now, we can use the formula for stock price per share:
Stock Price per Share = (Total Corporate Value - Total Preferred Stock - Total Debt + Cash and Equivalents) / Number of Shares Outstanding
Stock Price per Share = (900 - 20 - 90 + 600) / 25
Stock Price per Share = 27.20
Therefore, the best estimate for the stock price per share is $27.20 (option C).

Based on the Corporate Valuation Model,the Total Corporate Value of Chen