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Triton Corp. has 100M shares outstanding and it's the stock price is $15 per share. Triton...

Triton Corp. has 100M shares outstanding and it's the stock price is $15 per share. Triton has $250M of debt outstanding and $50M of excess cash. What is Triton’s Firm Value?

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Answer #1

Solution :

The formula for calculating the value of a firm

= Market Value of Equity + Market Value of Debt – Cash

As per the information given in the question we have

Market value of Debt = $ 250,000,000

Cash = $ 50,000,000

No. of Equity shares outstanding = 100,000,000

Stock price per equity share = $ 15

Thus Market value of equity = No. of Equity shares outstanding * Stock price per equity share

= 100,000,000 * $ 15

= 1,500,000,000

Applying the available information in the formula we have

The value of the firm = $ 1,500,000,000 + $ 250,000,000 - $ 50,000,000

= 1,700,000,000

Thus Triton’s Firm Value = $ 1,700,000,000

= $ 1.7 Billion

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