Based on the Corporate Valuation Model,Hunsader's Value of Operations Is

question 5

Multiple Choice

Based on the corporate valuation model,Hunsader's value of operations is $300 million.The balance sheet shows $20 million of short-term investments that are unrelated to operations,$50 million of accounts payable,$90 million of notes payable,$30 million of long-term debt,$40 million of preferred stock,and $100 million of common equity.The company has 10 million shares of stock outstanding.What is the best estimate of the stock's price per share?

• A)$13.72
• B)$14.44
• C)$15.20
• D)$16.00

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Definitions:

Riskless Arbitrage

The process of buying and selling in different markets to take advantage of differing prices for the same asset with no risk.

Standard Deviation

A statistical measure of the dispersion of a set of data from its mean, used to gauge the amount of variation or dispersion of a set of values.

Theoretical Value

An estimate of a security's value according to a financial model, rather than its trading or market price.

Binomial Option Model

A mathematical model used to price options, utilizing a discrete-time framework to track the possible paths an asset's price can take.