Question

Lex Corp.’s debt has a market value of $31,514 million, and Lex Corp. has no preferred stock. If Lex Corp. has 600 million shares of common stock outstanding, what is Lex Corp.’s estimated intrinsic value per share of common stock? (Note: Round all intermediate calculations to two decimal places.)

Answer 1

Answer:

Intrinsic value of stock = $38.31

Explanation:

given data

market value = $31,514 million

common stock outstanding = 600 million

solution

we consider here Value of firm  is $54,500

so we get Value of equity that is express as

Value of equity = Value of firm - Value of debt    ................1

put here value  get

Value of equity = $54,500 - $31514

Value of equity = $22986

so here Intrinsic value of stock will be

Intrinsic value of stock = Value of equity ÷  common stock outstanding    ............2

put here value we get

Intrinsic value of stock = $\frac{22986}{600}$

Intrinsic value of stock = $38.31