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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

MVA Henderson Industries has $500 million of common equity on its balance sheet; its stock price is $60 per share; and its Market Value Added (MVA) is $130 million. How many common shares are currently outstanding?

Summary Introduction

To compute: The outstanding common share of Company H.

Market Value Added: The measure to evaluate management’s performance in a company’s operations and growth, market value added considers the market value of company’s outstanding shares. It reports the market value over and above the book value of those outstanding shares.

Explanation

Solution:

Given,

Book value of common equity is $500 million.

Market value added is $130 million.

Stock price is $60 per share.

Formula to compute market value added,

Market Value Added=[(Number of Outstanding Shares×Stock Price)Book Value of Equity]

Substitute $500 for common book value of equity, $130 for market value added and $60 for stock price and solve for the value of number of outstanding shares

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