Transpipe owns 47% ownership stake in BP. Cameo owns a 29% stake in the BP. Suppose Transpipe sells 62.5% of its stake for $47 Million. If Comeo uses that transaction as the basis for calculating the value of its own 29% position, what value will Cameo obtain?
A) $18.1 Million
B) $46.4 Million
C) $16 Million
D) $47 Million
E) $29 Million

Question

Quizplus · Accepted Answer

Transpipe's 62.5% stake sale of its 47% ownership is equivalent to selling 29.375% of BP (0.625 * 47%). If this is valued at $47 million, then 1% of BP is valued at $47 million / 29.375. Cameo's 29% stake would then be valued at 29 times this per percent value, which calculates to approximately $46.4 million.

Transpipe Owns 47% Ownership Stake in BP