Consider the following financial data for Salesforce, Inc.: US 10-Year T-Bond Yield = .63% Market Risk...

Consider the following financial data for Salesforce, Inc.: US 10-Year T-Bond Yield = .63% Market Risk Premium = 6.25% Tax Rate = 21% Also the following data for Salesforce, Inc. : Stock Price = $249.21 Market Cap = $226.78 billion Beta = 1.24 Moody's = A- (111 basis points) Total Debt = $6.19 billion Number of Shares Outstanding = 910 million EPS = $2.59 Return on Assets = .93% Total Debt/Equity = 16.10 Current Ratio = 1.14 Book Value/share = $42.33 Revenues =$19.38 billion Price/Earning Multiple = 96.22

Using the Salesforce, Inc. financial profile information above, what is the Market Value Added (MVA) for Salesforce?

(1) $312.97B

(2) $173.48B

(3) $226.78B

(4) $188.26B

(5) $232.97B

Solutions

Expert Solution

Formula of Market Value Added = Total Market Value - Total Capital Invested

Total Market Value or Enterprise Value = Market cap + Debt

Market Cap = $ 226.78 Billion

Total Debt = $ 6.19 Billion

Total Market Value or Enterprise Value = 226.78 Billion + 6.19 = $ 232.97 Billion

Total Capital Invested = Book value of Equity + Book value of Debt

Book Value per share = $ 42.33

Number of shares outstanding = 910 million

Book value of Equity = 42.33 * 910 million = $ 38.52 Billion

Total Capital invested = 38.52 + 6.19 = $ 44.71 Billion

Market Value Added = 232.97 - 44.71 = $ 188.26 Billion

Hence, Market Value Added for Saleforce is $ 188.26 Billion which is the 4th Option.

jeff jeffy answered 2 years ago

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