The balancew sheet of Hutter Amalgamated is shown below. If the 12/31/09 value o

Question

The balancew sheet of Hutter Amalgamated is shown below. If the 12/31/09 value of operations is $756 million, what is the 12/31/09 intrinsic market value of equity?

Assets Liabilities and Equity
Cash $20.0 Accounts payable $19.0
Marketable securities 77.0 Notes payable 151.0
Accounts receivable 100.0 Accruals 51.0
Inventories 200.0 Total current liabilities $221.0
Tot current assets $397. Long-term bonds 190.0
Net plant and equipment 279.0 Preferred stock 76.0
Common stock 100.0
Retained earnings 89.0

Common equity $189.0

Total assets $676.0 Total liabilities and equity $676.0

Explanation / Answer

Total corporate value = Value of operations + marketable securities

= $756 + $77 = $833 million.

Value of equity = Total corporate value – debt – Preferred stock

= $833 – ($151 + $ 190) - $76 = $416 million.

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