Business Studies, asked by santhoshvarma1561, 8 months ago

Cash 100,000 debt 60,000 tax rate 10% discount rate 6% enterprise value 500,000 perpetual growth rate 4% given the data in the above table, calculate market capitalization of this hypothetical company.

Answers

Answered by saurabhghuge5139
7

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Answered by sonalip1219
25

The market capitalization of the company amounts to 540,000

Explanation:

The market capitalization of the company is computed using the Enterprise value formula as:

Enterprise value (EV) = Market Capitalization + Total Debt - Cash

So, for computing the Market Capitalization, the formula would be:

Market Capitalization = Enterprise value - Total Debt + Cash

where

Enterprise value (EV) is 500,000

Total debt is 60,000

Cash is 100,000

Putting the values above:

Market Capitalization = 500,000 - 60,000 + 100,000

Market Capitalization = 440,000 + 100,000

Market Capitalization = 540,000

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