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Based on the corporate valuation model

Based on the corporate valuation model, BTS Inc.’s total corporate value is P550 million. The balance sheet shows P20 million of cash, P80 million of notes payable, P70 million of long-term debt, P30 million of preferred stock, and P120 million of common equity. The company has 20 million shares of stock outstanding. What is the best estimate of the stock’s price per share?

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  1. The best estimate of BTS Inc.’s stock price per share is P18.50.

    Determine the Value of Equity:

      • First, calculate the total corporate value minus the value of debt and preferred stock.
      • Total Corporate Value = P550 million
      • Cash = P20 million (not needed in this calculation directly)
      • Notes Payable = P80 million
      • Long-term Debt = P70 million
      • Preferred Stock = P30 million
    • Calculate the Value of Equity:

      Value of Equity=Total Corporate ValueNotes PayableLong-term DebtPreferred Stock\text{Value of Equity} = \text{Total Corporate Value} – \text{Notes Payable} – \text{Long-term Debt} – \text{Preferred Stock}

    Stock Price Per Share=20 million shares/P370 million \text{Stock Price Per Share} = P18.50Stock Price Per Share = P18.50