Based on the free cash flow valuation model, the value of Wrigley Co.'s operations is $1,200 million. The company's balance sheet shows the following: $80 million in accounts receivable $60 million in inventory $100 million in short-term investments that are unrelated to operations. $90 million in accounts payable $120 million in notes payable $300 million in long-term debt $50 million in preferred stock $180 million in retained earnings $800 million in total common equity. If Wrigley has 25 million shares of stock outstanding, what is the best estimate of the stock's price per share?

Respuesta :

The best estimate of the stock's price per share is $41.5

Using this formula

Estimated stock's price per share =

[(Value of a company’s operations+$hort-term investments)-(Accounts payable+Notes payable)-Long-term debt ]/Shares of stock outstanding

Let plug in the formula

Estimated stock's price per share =[$1,200 million+$100 million)-($300 million+$120 million)-$50 million)]/ 25 million shares

Estimated stock's price per share=($1,300 million-$420 million-$50 million)/20 million shares

Estimated stock's price per share=$830 million/20 million shares

Estimated stock's price per share=$41.5

Therefore The best estimate of the stock's price per share is $41.5

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