Question

GHI Company has 6 million common shares outstanding and 1 million preferred shares outstanding, and its equity has a total book value of $45 million. Its debt has a market value of $40 million. If GHI Company's common and preferred shares are priced at $20.3 and $25.7, respectively, what is the market value of GHI Company's assets? Enter your answer in millions of dollars. V= million Click "Verify" to proceed to the next part of the question.

Answer 1

The market value of GHI Company's assets is calculated by adding the market value of equity to the market value of its debt, resulting in a total market value of $187.5 million.

Step-by-step explanation:

To calculate the market value of GHI Company's assets, we first need to determine the market value of the company's equity. This is done by multiplying the number of common shares and preferred shares by their respective market prices. GHI Company has 6 million common shares priced at $20.3 each and 1 million preferred shares priced at $25.7 each.

The market value of the common shares is 6 million × $20.3 = $121.8 million, and the market value of the preferred shares is 1 million × $25.7 = $25.7 million. Adding these two figures gives us the total market value of equity, which is $121.8 million + $25.7 million = $147.5 million.

Finally, to get the market value of GHI Company's assets, we add the market value of the equity to the market value of the debt: $147.5 million + $40 million = $187.5 million.