Question

Over the years, Masterson Corporation's stockholders have provided $35,000,000 of capital when they purchased new issues of stock and allowed management to retain some of the firm's earnings. The firm now has 1,900,000 shares of common stock outstanding, and the shares sell at a price of $30 per share. How much value has Masterson's management added to stockholder wealth over the years, that is, what is Masterson's MVA

Answer 1

$22,000,000

Explanation:

The computation of Masterson's MVA is shown below:-

MVA = Current market value - Initial capital provided by stockholders

= (1,900,000 × $30) - $35,000,000

= $57,000,000 - $35,000,000)

= $22,000,000

Therefore for computing the Masterson's MVA we simply applied the above formula.

Hence, the Masterson MVA is $22,000,000