Question

Luther Corporation Consolidated Balance Sheet December 31, 2006 and 2005 (in $ millions) .

2006 2005
Assets
Liabilities and Stockholders' Equity
2006 2005
Current Assets ​ ​
Current Liabilities ​ ​
Cash 56.1 58.5
Accounts payable 88.1 73.5
Accounts receivable 54.5 39.6
Notes payable / short-
term debt 10.9 9.6
Inventories 44.8​ 42.9
Current maturities of long-
term debt 40.7 36.9
Other current assets 5.0 3.0
Other current liabilities 6.0 12.0
Total current assets 160.4​ 144.0
Total current liabilities 145.7​ 132.0 ​ ​ ​ ​ ​ ​
Long-Term Assets ​ ​
Long-Term Liabilities​ ​
Land 66.8 62.1
Long-term debt 227​ 168.9
Buildings 108.5​ 91.5
Capital lease obligations ​ ​
Equipment 117.1​ 99.6 ​ ​ ​
Less accumulated
depreciation (54.4) (52.5)
Deferred taxes 22.8 22.2
Net property, plant, and
equipment 238​ 200.7
Other long-term liabilities --- ---
Goodwill 60.0 --
Total long-term liabilities 249.8​ 191.1
Other long-term assets 63.0 42.0
Total liabilities 395.5​ 323.1
Total long-term assets 361​ 242.7
Stockholders' Equity 125.9​ 63.6 ​ ​ ​ ​ ​ ​
Total Assets 521.4​ 386.7
Total liabilities and
Stockholders' Equity 521.4​ 386.7
Refer to the balance sheet above. If in 2006 Luther has 10.2 million shares outstanding and these shares are trading at​ $16 per​ share, then what is​ Luther's enterprise​ value?
A. -$540.0 million.
B. $771.4 million.
C. $385.7 million.
D. $521.4 million.

Answer 1

C. $385.7m

Step-by-step explanation:

Enterprise value = Market value of equity + Market value of all types of debt - Cash in the balance sheet

Market value of equity = Current share price × number of shares outstanding

= $16 × 10.2 million shares

= $163,200,000

Market value of all types of shares = Market value of long term debt + Market value of current portion of long term debt + notes payable / short term debt

We assume that market value of debts = Book value of debts

Therefore,

Market value of debt = $227m + $40.7m + $10.9m

= $278.6 m

Cash in the balance sheet = $56.10 m

Therefore;

Enterprise value = $163.20m + $278.60 - $56.1

=$385.7 m