A company has a debt obligation with a market value of $360,000. The total market value of the firm's assets is $1,000,000. The firm has no other liabilities.

The firm has 1 million shares outstanding.

What is the current share price?

Question

A company has a debt obligation with a market value of $360,000. The total market value of the firm's assets is $1,000,000. The firm has no other liabilities.

The firm has 1 million shares outstanding.

What is the current share price?

BlackTom AI · Accepted Answer

The problem gives a company with a debt obligation valued at $360,000 and total firm assets valued at $1,000,000, with no other liabilities. There are 1,000,000 shares outstanding. 
First, determine the equity value by subtracting the debt from the total asset value: Equity = Total Assets − Debt = $1,000,000 − $360,000 = $640,000. 
Next, compute the price per share by dividing the total equity value by the number of shares: Price per share = Equity / Shares = $640,000 / 1,000,000 = $0.64. 
This approach reflects the basic premise that the value of the equity equals the market value of the firm’s assets minus liabilities, and that the entire equity value is distributed across the outstanding shares. 
If one were to consider alternative interpretations (for example, treating debt differently, or including other liabilities or potential claims), the calculation would change; however, the problem states there are no other liabilities beyond the given debt and that the asset value fully represents the firm, so the straightforward valuation above is appropriate. 
Note: The provided options list is missing in the prompt, so there isn’t a set of alternative choices to compare directly. Nevertheless, the computed per-share value based on the given figures is derived from standard E = A − D and Price = E / N relationships in corporate finance.

COMM_V 298 201-207 2024W2 Class 17: Financing Decisions and Cost of Capital Practice Quiz

A company has a debt obligation with a market value of $360,000. The total market value of the firm's assets is $1,000,000. The firm has no other liabilities. The firm has 1 million shares outstanding. What is the current share price?

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