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27 April, 08:06

Valuable Incorporated's stock currently sells for $45 per share. The firm has 20 million share of common outstanding. The firm's total debt equals $600 million and its common equity equals $400 million. What is the firm's market value added

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  1. 27 April, 08:57
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    The firm's market value added is $500,000,000

    Explanation:

    According to the given data we have the following:

    Stock market price per share = $ 45

    No of shares = 20,000,000

    Therefore, Market value of equity = MPS * no of shares

    $45*20,000,000 = $ 900,000,000

    Invested capital or common equity = $400,000,000

    Therefore, in order to calculate the firm's market value added we would have to make the following calculation:

    Market value added = Market value of stock - invested capital

    Market value added = $900,000,000 - $400,000,000

    Market value added = $500,000,000

    The firm's market value added is $500,000,000
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