Question

Given the following information, what is the market value of XYZ Corporation?Common stock 13.6 million shares outstanding, selling at $31 per shareBond issue 1 $600 million total face value, selling at 98 percent of parBond issue 2 $150 million total face value, selling at $950 per bondA) $697.52 millionB) $874.82 millionC) $987.24 millionD) $1,049.43 millionE) $1,152.10 million

Answer 1

option (E) $1,152.10 million

Step-by-step explanation:

Data provided in the question:

outstanding Common stock = 13.6 million shares

Selling price = $31 per share

Total face value of bond Issue 1 = $600 million

selling at 98% of par

Total face value of bond Issue 2 = $150 million

selling at $950 per bond

Now,

Shareholder’s equity = Share selling price × number of shares outstanding

= $31 × 13.6 million

= $421.60 million

Value of bond 1 = Total face value × price %

= $600 million × 98%

= $588 million

Value of bond 2 = ( Total face value × price) ÷ 1000

= ( $150 million × 950 ) ÷ 1000

= $142.50 million

Therefore,

Market value of firm = $421.60 million + $588 million + $142.50 million

= $1,152.10 million

Hence,

The correct answer is option (E) $1,152.10 million