An analyst estimates that the enterprise value of a firm is $2.7 billion. The firm has $900 million in debt outstanding. If there are 900 million shares outstanding, what is the analyst's estimated value per share

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Answer:

Analyst's estimated value per share is $2.

Explanation:

Enterprise value of the firm is the total value of the firm. It is used as an alternative to the market capitalization. It is the total value of equity and debts of firm.

Enterprise value = Value of equity + value of Debt

2,700,000,000 = Value of equity + $900,000,000

Value of equity = $2,700,000,000 - $900,000,000

Value of equity = $1,800,000,000

Estimated value per share = Value of equity / total number of outstanding shares

Estimated value per share = $1,800,000,000 / 900,000,000 shares

Estimated value per share = $2 per share

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