Based on the corporate valuation model, Gay Entertainment's total corporate value is $1,200 million. The company's balance sheet shows $120 million of notes payable, $300 million of long-term debt, $50 million of preferred stock, $180 million of retained earnings, and $800 million of total common equity. If the company has 30 million shares of stock outstanding, what is the best estimate of its price per share

Question

Business

Eliza Richmond

19 September, 18:39

Based on the corporate valuation model, Gay Entertainment's total corporate value is $1,200 million. The company's balance sheet shows $120 million of notes payable, $300 million of long-term debt, $50 million of preferred stock, $180 million of retained earnings, and $800 million of total common equity. If the company has 30 million shares of stock outstanding, what is the best estimate of its price per share

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Christopher · Answer 1

The best estimate of its price per share is $24.33 per share.

Explanation:

For computing the best estimate price per share, first we have to calculate the market value of equity, than divide by stock outstanding.

In mathematically,

= Market value of equity : Stock outstanding

where,

Market value of equity = Total corporate value - notes payable - long term debt - preferred stock

= $1,200 - $120 - $300 - $50

= $730 million

Now put this value to the above formula which is equals to

= $730 million : 30 million shares outstanding stock

= $24.33 per share

Hence, the best estimate of its price per share is $24.33 per share.