Based on the corporate valuation model, Bernile Inc.'s value of operations is $750 million. Its balance sheet shows $50 million of short-term investments that are unrelated to operations, $100 million of accounts payable, $100 million of notes payable, $200 million of long-term debt, $40 million of common stock (par plus paid-in-capital), and $160 million of retained earnings. What is the best estimate for the firm's value of equity, in millions?
A) $429
B) $451
C) $475
D) $500
E) $525

Question

Quizplus · Accepted Answer

The firm's value of equity is calculated as the value of operations plus short-term investments minus the sum of accounts payable, notes payable, and long-term debt. Thus, $750 million + $50 million - ($100 million + $100 million + $200 million) = $500 million.

Based on the Corporate Valuation Model, Bernile Inc