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The value of Broadway-Brooks Inc.'s operations is $900 million, based on the free cash flow valuation model. Its balance sheet shows $30 million in short-term investments that are unrelated to operations, $110 million in notes payable (short-term debt), $90 million in long-term debt, and $20 million in preferred stock. If the company has 25 million shares of stock outstanding, what is the best estimate of the stock's price per share? (Hint: find the total value of the firm first.)

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Answer:

$28.4 per share

Explanation:

The computation of the stock's price per share is shown below:-

Total value of equity = Value of operation + value of short-term investments that are unrelated to operations - notes payable - short term debt - preferred stock

= $900 million + $30 million - $110 - $90 million - $20 million

= $710

Total shares outstanding = 25 million

Best estimated stock price per share = Total value of equity Ă· Total shares outstanding

=  710 ÷ 25

= $28.4 per share

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