Question

- Finance calculator One letter size page of formulas only. No written theory material or solved numerical comples - Empty sheets of paper for solving problems. Question 35 3 pts Based on the corporate valuation model the total corporate value of Chen Lin Inc. is $725 milion. Its balance sheet shows $110 million in notes payable 30 million in long-term debt, $20 million in preferred stock, 5140 million in retained earnings and $280 million in total common equity of the company has 25 million shares of stock outstanding, what is the best estimate of its stock price per share! 5244 5223 12121 Lenovo 7 6 7 W E 7 T U P o s D F G H T J IN X Z с B M • V 5 All AN

Answer 1

Estimated price per share= Market cap/Number of shares

Market cap= Enterprise value - (Debt + Preference shares)

Given,

Corporate value= $725 million

Debt= Notes payable + Long term debt = $110 million + $90 million = $200 million

Preference shares= $20 million

Number of shares= 25 million

Plugging these values,

Estimated price per share= 725-(200+20)/25 = $20.20