Based on the corporate valuation model,Hunsader's value of operations is $300 million.The balance sheet shows $20 million of short-term investments that are unrelated to operations,$50 million of accounts payable,$90 million of notes payable,$30 million of long-term debt,$40 million of preferred stock,and $100 million of common equity.The company has 10 million shares of stock outstanding.What is the best estimate of the stock's price per share?

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Quizplus · Accepted Answer

The best estimate of the stock's price per share can be calculated by first finding the total value of the firm (including operations and short-term investments), then subtracting the value of debt and preferred stock, and finally dividing by the number of shares outstanding. The value of operations is $300 million, and there are $20 million of short-term investments, making the total value $320 million. Subtracting the debts ($50 million accounts payable, $90 million notes payable, $30 million long-term debt) and $40 million of preferred stock gives us $110 million remaining for equity. Dividing this by 10 million shares gives a price per share of $16.00.

Based on the Corporate Valuation Model,Hunsader's Value of Operations Is