Question

Suppose Healey Corp. has the following characteristics:

Shares outstanding: 68,500
Current share price: $13.50
Total debt: $438,500
Total cash: $63,100
Based on the formula above, what is the enterprise value of this company? a) a) $948,850
b) $1,300,150
c) $1,500,400
d)$880,900
e) $1,125,600

Answer 1

The enterprise value of Healey Corp. is calculated by adding market capitalization and total debt, then subtracting cash. The calculation gives an enterprise value of $1,300,150 for Healey Corp.

Step-by-step explanation:

To calculate the enterprise value of Healey Corp., we use the following formula:

Enterprise Value = Market Capitalization + Total Debt - Cash

Where Market Capitalization = Shares Outstanding x Current Share Price

First, we calculate the Market Capitalization:
68,500 shares x $13.50 per share = $924,750

Now, we can calculate the enterprise value:
Enterprise Value = $924,750 (Market Cap) + $438,500 (Total Debt) - $63,100 (Total Cash)

Enterprise Value = $924,750 + $438,500 - $63,100

Enterprise Value = $1,300,150

Therefore, the enterprise value of Healey Corp. is $1,300,150, which matches option b).