Question

MVA Harper industries has $900 million of common equity on its balance sheet; its stock price is $80 per share; and its market value added (MVA) is $50 million. How many common shares are currently outstanding?

Answer 1

Answer:

N = 11,875,000

Therefore, the number of common shares that are currently outstanding is 11,875,000

Step-by-step explanation:

Oustanding shares can be defined as the company's stock currently held by all its shareholders, it also including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders. The outstanding common shares can be defined mathematically with the equation below.

MVA = (P ×N) - BV .....1

Where;

MVA = market value added

P = price per share

N = Number of outstanding shares

BV = balance sheet value of common equity

From equation 1, we can make N the subject of formula.

N = (MVA + BV)/P .....2

Since;

MVA = $50,000,000

BV = $900,000,000

P = $80

Substituting into equation 2

N = (50,000,000 + 900,000,000)/80

N = 11,875,000

Therefore, the number of common shares that are currently outstanding is 11,875,000

Answer 2

Answer:

11,875,000 common shares outstanding

Step-by-step explanation:

The number of common shares outstanding of Harper industries is determined by the company's common equity added to its MVA and then divided by the stock price per share.

If common equity is $900 million, MVA is $50 million and the price per share is $50, the number of shares outstanding is:

$n=\frac{900,000,000+50,000,000}{80}\\n=11,875,000$