Problem 35 MVA Henderson Industries has 900 million of commo

Problem 3-5 MVA Henderson Industries has $900 million of common equity; its stock price is s40 per share; and its Market Value Added (MVA) is $180 million. How many common shares are currently outstanding? Write out your answer completely. For example, 5 million shares should be entered as 5,000,000. Round your answer to the nearest whole, if necessary common shares

Solution

Common equity = $900 million

Stock price= $40

MVA= $180 million

MVA= MArket value of business- Cost of equity

180,000,000= Number of shares*$40 - 900,000,000

Number of shares= (180,000,000+ 900,000,000 )/40

=27,000,000 shares