Question

Correct Inc. is a publicly traded firm with 100 million diluted shares outstanding trading at $37.50 per share. The company has $1 billion of debt outstanding with a cost of debt at 6.5% at a marginal tax rate of 40%. The company has $100 million of cash on its balance sheet. What is the enterprise value of Correct Inc.

Answer 1

The enterprise value of Correct Inc is $4,650 M

Step-by-step explanation:

In this question, we are interested in calculating the enterprise value of Correct Inc

To do this, we use the mathematical formula below;

Enterprise Value = market value capital and debts - cash and investments

Enterprise Value = 100m shares * $37.50 per share + $1000m debts - $100m

= $3750 m + $1000 m - $100 m

= $4650 m