Over the years, Janjigian Corporation's stockholders have provided $15,250 of capital, part when they purchased new issues of stock and part when they allowed management to retain some of the firm's earnings.The firm now has 1,000 shares of common stock outstanding, and it sells at a price of $42.00 per share.How much value has Janjigian's management added to stockholder wealth over the years, i.e., what is Janjigian's MVA?

Question

Quizplus · Accepted Answer

Market Value Added (MVA) is calculated as the difference between the current market value of a firm's equity and the capital contributed by shareholders. Here, the current market value is 1,000 shares * $42.00 = $42,000. The capital provided by stockholders is $15,250. Thus, MVA = $42,000 - $15,250 = $26,750.

Over the Years, Janjigian Corporation's Stockholders Have Provided $15,250 of Capital