Question

1. An analyst estimates that the enterprise value of a company is $6.4 billion. The firm has $900 million of debt outstanding and minority interest of $400 million. If there are 800 million shares outstanding, what is the analyst’s estimated value per share?
   1. $6.18
   2. $6.28
   3. $6.38
   4. $6.48

2. From the following list of ten transactions, how many can be classified as investing?

Common Stock Dividends	Sales and marketing expenses	Common stock repurchases	Research and Development Expenditures	Additions to property and equipment
General and administrative expenses	Common stock issues	Sales (revenue)	Income Taxes	Accounts Receivable

1. 1
2. 2
3. 3
4. 4

3. An investor who believes that “Price is what you pay, but value is what you get” can be labeled:
   1. Intuitive Investor
   2. Passive Investor
   3. Hopeful Investor
   4. Fundamental Investor

Answer 1

1) Enterprise value = $ 6400 million

Debt value = $ 900 million

Equity value = 6400- 900 = $5500 million

Out of which minority interest = $ 400 million

Therefore value for shareholder = 5500-400 = $5100 million

No of shares outstanding = 800 million shares

Therefore, value estimated per share = (5500-400) / 800  = $ 6.38 per share

Option c is correct

Sr. No.	Transaction	Activity
1	Common Stock Dividends	Financing Activity
2	Sales and marketing expenses	Operational Activity
3	Common stock repurchases	Financing Activity
4	Research and Development Expenditures	Investment Activity
5	Additions to property and equipment	Investment Activity
6	General and administrative expenses	Operational Activity
7	Common stock issues	Financing Activity
8	Sales (revenue)	Operational Activity
9	Income Taxes	Operational Activity
10	Accounts Receivable	Operational Activity

Only 2 activities are investment activities.

Option b is correct

An investor who believes that “Price is what you pay, but value is what you get” is looking for value in equity. He is not just speculating the price or looking for short term gains. He is looking for value in Equity. Therefore he has to be labelled as Fundamental Investor.

Therefore option d is correct

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