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Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

15th Edition
Eugene F. Brigham + 1 other
ISBN: 9781337395250
Textbook Problem

MVA Harper Industries has $900 million of common equity on its balance sheet; its stock price is $80 per share; and its market value added (MVA) is $50 million. How many common shares are currently outstanding?

Summary Introduction

To compute: The outstanding common share of Company H.

Introduction:

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

Explanation

Given,

The book value of common equity is $900 million.

The market value added is $50 million.

Stock price is $80 per share.

Formula to compute market value added,

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

Substitute $900 million for common book value of equity, $50 million for market value added and $80 for stock price and solve for the value of number of outstanding shares

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