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Harper Industries has $300 million of common equity on its balance sheet; its stock price is...

Harper Industries has $300 million of common equity on its balance sheet; its stock price is $50 per share; and its market value added (MVA) is $120 million. How many common shares are currently outstanding? Write out your answer completely. For example, 5 million shares should be entered as 5,000,000. Round your answer to the nearest whole number, if necessary.

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Answer #1


Book value of common equity or shares = $300 million

Stock price = $50 per share

Market value added = $120 million

Let number of common shares outstanding be x shares.

As we know that,

Market Value added = [Stock price * Number of common shares outstanding] - Book value of common shares

$120 million = [$50 * x] - $300 million

50x = 120 million + 300 million

50x = 420 million

x = 420 million/50

x = 8,400,000

Thus,

The number of common shares currently outstanding is 8,400,000 shares.

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